Shares of contract electronics manufacturer Fabrinet (FN) are up $1.12, or 3%, at $35.90, after the company yesterday announced its chief executive, Tom Mitchell, will become executive chairman, passing the baton to Seamus Grady, who is a 13-year veteran of contract manufacturer Sanmina (SANM).
Mitchell remarked that he is "confident Seamus will be able to lead our organization as we further strengthen our position in the marketplace." Grady remarked that Mitchell, Fabrinet's founder, had "built a fantastic company."
In response, Stifel Nicolaus's Patrick Newton today reiterates a Buy rating, and a $48 price target, noting that the company had been "undergoing a succession plan" for Mitchell, so this wasn't unexpected.
Newton notes that Grady was head of the "mechanical systems division" at Sanmina, and he thinks Grady's "extensive manufacturing background (particularly at scale, with 10 facilities under his management at Sanmina)" is in accord with Fabrinet's "long-term goal to continue adding scale.
Importantly, Grady may help Fabrinet diversify from a focus on fiber optics, writes Newton:
Additionally, we see Seamus as having extensive leadership experience with both optical manufacturing (background at Lucent; Mechanical Systems Division at Sanmina manufactures the cabinets/chassis/frames/racks/ and storage cabinets integrated with electronic components and sub-systems that optical components are supplied into) and non-optical manufacturing (focus Medical experience at Sanmina). We view this competency in both optical and non-optical manufacturing as likely to be an aid in helping the company move beyond its optical focus to a 50/50 optical/non-optical mix long-term. We emphasize that our recent conversations with Fabrinet's management highlighted that Fabrinet was targeting its next CEO to have a combination of operational excellence, deep technical expertise, and strength with customers as they will have to be customer facing.