Robust demand and disciplined supply for metal casings
Comment of the Day

September 19 2014

Commentary by Eoin Treacy

Robust demand and disciplined supply for metal casings

Thanks to a subscriber for this report from Deutsche Bank focusing on the metal casings sector for hand held devices. Here is a section:  

We hold an optimistic view on the metal casings industry. On the demand side, we are confident about its robust shipment momentum within the next three years due to (a) the design trend toward ultra-slim and lighter form-factor, and larger panel-screens on mobile devices (NBs, smartphones and tablets), (b) Apple’s preference for using metal casings (its adoption rate at 86%, Figure 19) for iPhone, iPad and Macbook products, and (c) the increasing adoption rate from other smartphone and tablet brand vendors. On the supply side, the disciplined procurement of CNC (Computer Numerical Control) machines by major casing suppliers in Asia (hence controlled supply increase) and the higher entry barriers in metal casings manufacturing and surface treatment solution can help ease the Street’s concerns about the industry’s oversupply risks.

Eoin Treacy's view

Here is a link to the full report.

It is easy to become desensitised to photos of long lines of people sleeping outside Apple stores in order to be among the first to own the next new product. However these people represent the loyal customer base that is the envy of every other consumer electronics company. News last week that privately held, discount smart phone manufacturer 
Xiaomi would be moving to metal cases exemplifies the trend of Apple imitators, not least in the build quality end users have come to expect.

Taiwan listed Catcher Technology (Est P/E 13.86, DY 1.64%) continues to find support in the region of the 200-day MA on pullbacks. The depth of the July decline represents an inconsistency but it rebounded impressively. A slowing in the pace of the advance can probably be expected but a sustained move below the 200-day MA would be required to question the character of the broad uptrend.

Casetek (P/E N/A, DY 4.89%) has held a progression of incrementally higher reaction lows since its IPO in 2013 and a sustained move below TWD170 would be required to question potential for additional upside.

Foxconn (P/E N/A, DY 4.89%) has held a progression of higher reaction lows within its base for the last year and a sustained move below TW$70 would be required to question medium-term scope for a successfully upward break.

Hong Kong listed Ju Teng (Est P/E 15.55, DY 1.28%) has pulled back sharply over the last few months but has at least paused in the HK$4 area as value investors’ return. The potential for at least a reversionary rally back up towards the now declining 200-day MA is improving.



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