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Goldman Sachs cuts target price on shares of casing supplier

2012/07/21 20:20:07

Taipei, July 21 (CNA) Goldman Sachs has lowered its target price on shares of Catcher Technology Corp., a Taiwan-based metal casing supplier, on falling shipments of casings for cellphone use and a weakening gross margin.

In a recent research note, the brokerage said it cut the target price on Catcher shares to NT$207 (US$6.90) from NT$228, and reiterated a "neutral" recommendation on the stock.

On Friday, shares of Catcher fell 1.71 percent to close at NT$172.50 on the Taiwan Stock Exchange, while the benchmark weighted index ended up 0.22 percent at the day's high of 7,164.68 points.

As Catcher's performance has been affected by slowing sales of smartphone vendor HTC Corp., one of the casing supplier's major clients, Goldman has turned cautious about its cellphone housing shipments.

In the second quarter of this year, Catcher posted NT$9.6 billion in sales, up 11 percent from a quarter earlier, but the figure was lower than NT$9.9 billion Goldman had previously anticipated.

Goldman said Catcher is expected to secure orders from new tablet computer makers in the second half of this year, but the company is unlikely to boost sales significantly and make up the fall in the cellphone casing shipments.

In addition to casings for tablet computer use, housings for ultrabook computer use are expected to serve as the new driver to Catcher's sales growth, the brokerage said, adding the Taiwanese firm has started allocating more resources to tablet and ultrabook computer casing production.

However, Goldman said, as ultrabook computers remain relatively expensive and tablet computers have entered cut-throat price competition, Catcher's casing shipments could be compromised.

Goldman said Catcher is likely to see a downtrend in its gross margin due to a weakening asset turnover ratio, expecting the gross margin for 2012 and 2013 will stand at 43 percent and 42 percent, respectively, compared with 46.3 percent recorded in the fourth quarter of 2011.

The brokerage has also lowered its forecasts of Catcher's earnings per share by 8-10 percent to NT$15.01, NT$16.26 and NT$17.19 for 2012, 2013, 2014, respectively, compared with NT$14.93 recorded in 2011.

(By Lo Hsiu-wen and Frances Huang)