Catcher's new China plan aimed at cutting costs: analyst

12/26/2013 11:56 AM
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Taipei, Dec. 26 (CNA) Catcher Technology Co., one of Taiwan's leading metal casing makers, is gearing up to cut costs through a new investment plan at a production site located in Suqian, in China's Jiangsu Province, an analyst said Thursday.

"It has been a trend for Taiwanese investors operating in China to move away from certain cities in southern China where labor costs have risen sharply recently," KGI Securities analyst Eason Lee said.

"For Catcher, investing more in Suqian, where wages are relatively low, is expected to help the company achieve the goal of lowering production costs by 10 percent per year," Lee said.

In addition, Lee said that as its clients have been moving north in China, the plan to invest more in Suqian is a way to provide buyers with better services through geographic proximity.

Lee's comments came after a Catcher board meeting approved a proposal a day earlier that the metal casing supplier will invest US$100 million or about NT$3 billion in the Suqian plant. The company said the investment plan has been made to tap solid global demand for mobile devices in 2014.

Catcher said that as the company is upbeat about the market outlook for 2014, it is necessary for the metal casing maker to invest more to satisfy increasing orders from its clients, adding that the production expansion is scheduled to start in the first quarter of next year.

In the first nine months of this year, Catcher's capital expenditure totaled NT$6.7 billion and the spending is expected to top that level by the end of this year, the company said. The NT$3 billion investment in Suqian will be part of Catcher's capital expenditure for 2014.

"Due to the efforts in cost-cutting, Catcher is expected to maintain its profit margin and strengthen its bottom line," Lee said. In the third quarter of this year, Catcher's gross profit stood at 41.7 percent, compared with 44.5 percent recorded in the second quarter, when the company reaped more foreign exchange gains.

Many investors expect that Catcher's new investment in Suqian will meet rising demand for iPhones, as the Taiwanese firm has been dubbed one of the Apple concept stocks in the local stock market.

"Apple is the largest buyer of Catcher products, accounting for about 30 percent of the company's total sales. However, I do not think the Suqian investment plan is only for Apple but for all of its clients."

On the back of the launch of Apple's new iPhones and iPads in September and October, Catcher's consolidated sales for October and November exceeded NT$4.5 billion each month. The market expects the company's sales for the fourth quarter to rise about 20 percent from the third quarter's NT$10.44 billion.

"Due to the hopes about significant sales for the fourth quarter, Catcher's share price has gained sharply since the beginning of October. But I still recommend a `buy' and a target price of NT$220 on the stock," Lee said.

As of 11:27 a.m., shares of Catcher had added 0.81 percent to NT$187.50.

(By Frances Huang)ENDITEM/J

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