Nanya cut at Merrill on cash; Inotera rated `sell'

Nanya Technology Corp (南亞科技), the country's second-largest memory-chip maker, was lowered to "neutral" from "buy" at Merrill Lynch & Co, which cited an expected cash shortage at the company. The shares fell.

Separately, Inotera Memories Inc (華亞科技), Taiwan's fourth-largest maker of memory chips, was rated "sell" in new coverage by Merrill Lynch, while ProMOS Technologies Inc (茂德科技), Taiwan's third- biggest memory-chip maker, was rated "buy," according to reports dated yesterday.

Cash

Nanya needs cash to build a more advanced 300-mm factory. Taoyuan, Nanya on Jan. 24 reiterated plans to spend NT$60 billion (US$1.8 billion) this year on equipment and facilities to boost capacity by 50 percent or more. The company began building its first 300-mm fab in March last year and is due to start production by the end of this year, it said last April.

"Our analysis shows a cash shortage of over US$1 billion in 2007 if Nanya spends NT$60 billion on its first in-house 300-mm fab as planned," analysts Simon Dong-je Woo, Daniel Heyler and Stevie Cho wrote in a report.

They cut the 12-month price target on the stock to NT$26 from NT$32.

Shares of Nanya

Shares of Nanya declined 1.55 percent, after dropping as much as 2.5 percent, to close at NT$25.4, while Inotera's stock fell 2.28 percent to NT$36.35.

Inotera, a venture between Nanya and Munich-based Qimonda AG, only sells chips to its parent companies. Inotera's profit margins at "are abnormally high, and could translate to pricing pressure from the parent companies particularly if DRAM prices remain weak," Woo, Heyler and Cho wrote in a separate report.

They have a 12-month price target of NT$37.50 on the stock.

Powerchip Semiconductor Corp (力晶半導體), Taiwan's biggest memory-chip maker, was maintained at "buy," with its 12-month price target lowered to NT$30 from NT$32.