Mobile-phone maker and listing candidate Foxconn International Holdings looks forward to robust earnings growth through its outsourced manufacturing business, but its narrow customer base could pose a threat to the firm. At a presentation to about 150 fund managers and investors yesterday to promote its upcoming $3.37 billion initial public offering, the company said it was highly dependent on two key customers - Nokia and Motorola. In the first three quarters of last year, Foxconn's combined sales to the two mobile-phone giants reached US$1.86 billion, accounting for 89 per cent of its turnover. 'This seems to me a key concern. While the company unveiled plans to expand its customer base, I still have doubts. It's not easy and it will take time - particularly in this highly competitive sector,' said one fund manager who attended the presentation. Foxconn said in a preliminary listing prospectus that no other single customer accounted for more than 10 per cent of its turnover since 2003. 'We could have difficulty securing comparable levels of business from other customers to offset the loss of revenue from losing one or both of these customers,' it said. The company's cash flow and profitability would be adversely affected if its key customers suspended purchases or delayed payments, the prospectus said. 'Also, the close relationship with Nokia and Motorola would mean Foxconn's share will be highly correlated with these two companies,' another fund manager said. 'Any profit warnings of Nokia and Motorola might trigger a collapse of Foxconn's share price.' Foxconn, a unit of Taiwan-listed Hon Hai Precision Industry, is offering 869.4 million shares at $3.06 to $3.88 each to finance expansion of its existing production facilities and to repay bank borrowings. The offering price represents a price-earnings ratio of 15 to 19.1 times last year's estimated earnings of $1.39 billion. 'The valuation seems fair, but you've got to be a believer in the global outsourcing trend,' a third fund manager said. Assuming a 25 per cent growth in earnings this year, the valuation would be in the range of 12 to 15 times earnings, he said. A Goldman Sachs report projects that Foxconn's net earnings will rise 27 per cent to US$227.5 million this year. The UBS forecast is even more optimistic at US$249 million, a 39 per cent increase from last year's estimated earnings. The two investment banks are the joint bookrunners for the share listing. Book-building for the share issue will end next Thursday. Subscription for retail investors will run from Monday until Thursday, and trading will start on February 3.