Hana gets nod on upbeat outlook

Eleven out of 19 brokers in the Securities Analysts Association (SAA) had a "buy" recommendation for Hana with a target range of Bt20.28-Bt24.50.

Hana is among the "top picks" in the latest SAA analysts' consensus announced on Monday.Hana is a leading IC and PCBA manufacturer with plants in Bangkok, Lamphun, Ayutthaya, and Shanghai.

It has a sizeable stake in Advanced Interconnect Technologies, which has IC assembly and test operations in Indonesia, Hong Kong and California.

PCBA business accounts for 54 per cent of the company's total sales revenue, IC business contributes 34 per cent and others make up the rest.

It posted a net profit of Bt447.64 million in the first quarter and Bt2.45 billion last year.

The chance of a negative impact from the US recession was estimated at "50 per cent" as Hana's customers are US companies.

This downside was regarded by the analysts as its "major risk".

Kim Eng Securities (Thailand) changed its recommendation on the stock from hold to buy, placing its fair value at Bt22.75.

Hana's management earlier said some clients who had reduced inventories in the first quarter had recently replenished their stocks as demand still appeared to be strong.

Its order book recorded a stronger position in May and the management expected the trend to continue in the third quarter. IC production also rebounded strongly in May and "almost touched" record levels while its PCBA business also saw growth.

The broker said a weaker baht against the US dollar should help Hana's profit margin and may even have a positive inventory revaluation. The baht has eased by 3 per cent over the past two months. The broker raised Hana's normalised profit forecast this year by 8 per cent to Bt1.89 billion, on the assumption its IC sales could rise 10 per cent to US$169 million (Bt5.6 billion) and its PCBA sales could surge 15 per cent to $264 million.

Hana's PCBA business has been growing with several key products, computer-notebook touchpads, high-speed transmission and receivers for 2G and 3G telecom base stations, GPS devices and medical devices, such as hearing aids. In addition, the company has maintained growth of more than 17 per cent in PCBA for three years, it said.

Asia Plus Securities also recommended a buy with fair value at Bt20.28, and an expected dividend yield of 7.2 per cent.

The broker was upbeat on its outlook, saying Hana's earnings should rebound in the second quarter as capacity expansion of its PCBA plant in Lamphun would come on stream.

Its IC business, which offers a high profit margin, is also recovering, it said.

It said a weaker baht should help as almost all of Hana's income is derived in US dollars while 63 per cent of its cost is in dollars.

Hana should also booked gains from inventory revaluation after a recent reverse of the US dollar's depreciation trend, it said.

It could enjoy some gains as the price of gold, one of its main raw materials, had eased to about $880 per tonne recently.

UOB Kay Hian Securities, however, took a more cautious position on Hana.

It recommended a "buy on weakness" rating with a lower target price of Bt19.20.It said Hana's normalised profit in the second quarter would improve from the first quarter as IC sales had recovered, the high season - normally the second half - was approaching and the company's profit would improve further due to the  baht's depreciation against the greenback.

Also, a 10-per-cent increase in the production capacity of Hana's IC plant in Ayutthaya, which will start in the third quarter, would be another driver for higher earnings than the first half, the broker added.