Hon Hai Rises After Sharp Loss Provisions Reversed: Taipei Mover

Hon Hai Precision Industry Co. (2317), a maker of iPads for Apple Inc., rose to the highest level in four months in Taipei trading after it reversed loss provisions for a planned investment in Sharp Corp.

Hon Hai, the flagship of Foxconn Technology Group, jumped 6.4 percent to NT$90.20 as of 10:44 a.m., headed for the highest close since April 27. Foxconn Technology Co. (2354), an affiliate that also plans to invest in Sharp, gained 2.2 percent to NT$116.50, while Taipei’s benchmark Taiex index rose 0.7 percent.

The group, through Hon Hai and Foxconn Technology Co., agreed in March to buy 9.9 percent of Sharp for 67 billion yen ($856 million) in a sale of new shares. Hon Hai’s first-half results included loss provisions of NT$4.5 billion ($151 million) for the planned investment, and as the deal wasn’t approved by local authorities, it reversed the charge as of July 31, the Taipei-based company said Aug. 31. Foxconn Technology Co. reversed loss provisions of NT$2.26 billion.

“We expect Hon Hai to take a 9.9 percent equity stake in Sharp but now at a lower price,” Kirk Yang, managing director for technology research at Barclays Plc in Hong Kong, wrote in a report today. “Sharp needs Hon Hai more than the other way around.” He maintained Hon Hai at overweight with a price target of NT$113.

Hon Hai is the world’s largest contract manufacturer of electronics, while Foxconn Technology Co. makes computer cases.

Alliance Talks

Sharp President Takashi Okuda met with Foxconn executives in Osaka on Aug. 30 to discuss alliance terms, Hiroshi Takenami, a spokesman for Japan’s biggest liquid-crystal display maker, said last week. Okuda plans to meet with Terry Gou, Foxconn’s founder, in Taiwan as early as this week, the Sankei newspaper reported today, without saying where it got the information.

The Japanese company aims to complete talks with Foxconn this month, the Asahi newspaper said yesterday, citing an interview with Okuda.

Foxconn plans to proceed with its investment in Sharp “at the most appropriate time and most appropriate price” because it’s looking at the long-term prospects, Gou said Aug. 5.

The Sharp deal has no impact on Hon Hai’s finances as of July 31, the Taiwanese company said in its Aug. 31 statement.

To contact the reporter on this story: Janet Ong at jong3@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

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