Hon Hai's investment in SK C&C to bring new synergy: Merrill Lynch
Central News Agency
2014-07-01 12:28 PM
Taipei, July 1 (CNA) The decision by Taiwan's Hon Hai Precision Industry Co., the world's largest contract electronics maker, to invest in Korean IT service provider SK C&C Co. is aimed at forging new telecom and cloud opportunities, according to Bank of America Merrill Lynch. Hon Hai, a major supplier of Apple Inc.'s iPhones and iPads, announced Monday that it had acquired a 4.9 percent stake in SK C&C, a subsidiary of the SK Group, South Korea's third largest business group, for US$376 million. The transaction will make Hon Hai, also known as Foxconn Technology Group, the second largest shareholder of SK C&C, industry insiders said. Merrill Lynch analyst Robert Cheng said in a report on Monday that although Hon Hai's investment is only US$376 million, the Taiwanese supplier is believed to be seeking cooperation with SK C&C's parent company, SK Group, through this investment. Hon Hai's purchase of a stake in SK C&C should also "bring more synergy to telecom, cloud, and IT services," which will be Hon Hai's focus in the coming five to 10 years as it leverages its existing exposure in the Greater China market, Cheng said. Cheng believed that SK C&C is the most important subsidiary in the SK Group, as SK C&C also holds a 31.8 percent stake in SK Corp. -- South Korea's top refiner -- and a 10 percent stake in financial service provider SK Securities Co. SK Corp. owns a controlling 25.2 percent stake in SK Telecom, South Korea's largest wireless mobile phone service provider. "By partnering with current players, Hon Hai is quickly ramping up its business in cloud, telecom, and technology service," Cheng said. The most important catalyst for Hon Hai in 2014, however, will still come from its increasing production of Apple's new products, the analyst said. He forecast 30 percent quarter-on-quarter growth in the company's sales in the third quarter and 31 percent growth in the fourth quarter and gave the stock a "buy" rating with a price target of NT$107 (US$3.58). Hon Hai shares had risen 1.5 percent to NT$101.5 as of 10:10 a.m. Tuesday in Taipei trading. (By Jeffrey Wu)
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