Tue, Aug 11, 2015 page13

• HTC trading at less than cash on hand

  CASH ASSETS: HTC, the one-time highest-selling smartphone brand in the US, is facing dropping market shares amid speculation the brand cannot recover from sales declines

  • Bloomberg
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  A 60 percent plunge in HTC Corp’s (宏達電) stock this year pushed its market value to below its cash on hand. Investors have effectively said the smartphone maker’s brand, factories and buildings are worthless.

  HTC’s market price fell yesterday to NT$47 billion (US$1.48 billion), below the NT$47.2 billion cash it had at the end of June. A drop of as much as 9.8 percent in its stock before a late rally signaled investors put no value on the rest of the company.

  “HTC’s cash is the only asset of value to shareholders,” said Calvin Huang (黃文堯), who has a NT$46.50 price target on the stock at Sinopac Financial Holdings Co (永豐金控) in Taipei.

  “Most of the other assets shouldn’t be considered in their valuation because there’s more write-offs to come and the brand has no value,” he said.

  HTC’s fall from a market capitalization of more than NT$900 billion in 2011 charts the perils of a product and marketing strategy that has failed in the face of stiffer competition from Samsung Electronics Co and Huawei Technologies Co (華為).

  Once the best-selling brand in the US, the failure of its One, Butterfly and Desire smartphones to drive sales has pushed HTC outside a global top-10 now dominated by Chinese brands.

  Its forecast for third-quarter sales of as much as 48 percent below analyst estimates follows a 35 percent cut to projected revenue in the preceding period and indicates that the Taoyuan, Taiwan-based company has little chance of regaining market share in the short-term.

  HTC did not respond to an e-mailed request for comment. There will be no one-time non-operating items this period, Chief Financial Officer Chang Chialin (張嘉臨) said on Thursday.

  HTC shares fell to as low as NT$56.80 before closing at NT$57.50 in Taipei trading yesterday. With HTC having 828 million shares on issue, the cash-per-share is NT$57.

  The forecast loss-per-share for this period, which was five times wider than estimated, sparked analysts to slash their share price valuations of the stock by 17 percent to NT$55.54.

  Analysts also now see profit eluding HTC through the end of 2017 and none of the 22 tracked by Bloomberg that updated their view in the past three months recommend investors buy the stock.

  While HTC has no long-term debt, 34 percent of its asset value comes from inventory and accounts receivable, according to Bloomberg calculations. Its inventory, measured in turnover days, jumped 60 percent in the 12 months through June 30.

  To reverse sales that have fallen by more than 75 percent since the September quarter of 2011, HTC plans to cut costs and focus on the high-end market where profits are higher. Reductions are to start in the current period and start to show results by the first quarter next year, Chang said.

  “We think these efforts are not enough to turn HTC around in the next two years,” Deutsche Bank AG analyst Birdy Lu, said in a report on Friday.

  “HTC has little chance to compete with iPhone and Samsung given limited resources, and might continue to lose shares to Chinese brands in mid to low-end segment,” Lu said.
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