Apple's key assembly partner readies for Shanghai IPO

Hon Hai unit Foxconn could command valuation of up to $83b, likely China's biggest debut since 2015 stock crash

BEIJING • Hon Hai Precision Industry is racing ahead with an initial public offering (IPO) of its automated factory division that may become China's biggest debut since the 2015 stock crash.

Foxconn Industrial Internet, a unit of Apple's most important assembly partner, won approval on Thursday to list in Shanghai about a month after publishing a prospectus that outlined plans to spend 27.3 billion yuan (S$5.7 billion) on expansions into cutting-edge technology.

That speed underscores the anticipation around the Taiwanese company that embodies billionaire Terry Gou's ambition of moving beyond assembling PCs and phones for the world's top electronic brands.

Known as FII, the business could command a valuation of as much as 400 billion yuan (S$83 billion) by some estimates - on a par with Sony Corp. With sales of 355 billion yuan last year, its revenue is about the same as Walt Disney or HP.

The fundraising could be the 11th largest on the mainland and would be one of the highest-profile tech listings in Shenzhen or Shanghai in years, as the government courts a long under-represented sector.

"The size of the IPO should be pretty close to what's disclosed in the prospectus," said Ms Amy Lin, a Shanghai-based analyst with Capital Securities Corp, who estimates the stock could command a share-price multiple of 15 to 19 times earnings for its debut.

Foxconn, which makes smartphones, cloud computing equipment and robots, wants the 27 billion yuan to fund projects including artificial intelligence and fifth-generation wireless technologies, positioning Hon Hai even more centrally in the tech supply chain. Taipei-listed Hon Hai climbed 2.8 per cent yesterday, its biggest gain since Jan 19.

The debut will come amid a push to attract capital from Taiwan.

Beijing has introduced plans to welcome Taiwanese investment in some of the nation's most restricted sectors, though pro-independence Taiwanese President Tsai Ing-wen has warned that such moves could suck away much-needed capital.

Foxconn's debut also dovetails with an effort to bring tech listings back to the mainland. Chinese enterprises have long pursued the prestige and capital associated with marquee overseas debuts.

However, technology businesses from Alibaba Group Holding to Tencent Holdings have in recent years outstripped their old-economy peers to become the nation's largest, and virtually none are traded domestically.

"It's hard to estimate the actual IPO size of Foxconn, but it should be big," said Shanghai-based fund manager Dai Ming at Hengsheng Asset Management.

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on March 10, 2018, with the headline 'Apple's key assembly partner readies for Shanghai IPO'. Print Edition | Subscribe