Flash memory chipmaker Macronix International Co (
The positive outlook gives the company leeway over the timing of its share sale to international investors, they said. Macronix is reportedly planning to issue American depository receipts to help pay for the construction of its NT$43 billion third wafer manufacturing plant, but has not specified when this year the ADR issue will be made. Construction of the plant began at the end of June.
"Macronix has received flash memory chip orders into the fourth quarter and the first quarter of next year," said Jovi Chen, assistant manager of research at China Securities. Flash memory chips are used for electronics, such as mobile phones, which require large amounts of immediate memory. Macronix full order book would help shield it from a possible downturn in the semiconductor or telecommunications sector and a slowing US economy, Chen said.
Its production mainly of 4MB and 8MB flash memory chips, which are used for non-mobile phone applications, would also provide some protection from the lower than expected growth in mobile phone handset demand. "Very little of its flash goes into handsets," said Kristopher Thornton, vice president of research at ING Barings, Taipei.
Further, Intel's decision to raise flash prices last month suggests that "demand has not decreased enough for it not to increase prices," said Thornton. Macronix is soon likely to follow suit. "Macronix stated its looking at raising flash prices possibly by 20 percent," said Thornton. News about the price rise may have been a factor in Macronix stock turnover increasing 80 percent from the previous day, according to Thornton. The turnover of 44.6 million shares was the second highest in the TAIEX yesterday. The stock closed unchanged at NT$61, after rising during the session to NT$62.5, before falling at the end of the session along with other electronics stocks.
A rise in Macronix prices for flash memory would mean growing margins, said China Securities' Chen, who believes concerns about the future prospects for the semiconductor and telecommunications industries have created a good buying opportunity.
"People have concerns the demand side will go down due to the slow-down of the US economy, but we'e expecting a soft landing," said Chen. The flash memory chip industry's strong outlook and its enormous expected growth also provide Macronix with the leeway to delay its ADR issue until the general investment climate improves.
With its growing profits and strong orders, Macronix can meet the cost of construction of the third fab plant by arranging to have expenses made as accounts payable, Chen said, and paying for them with the funds from the ADR later.
Thornton is also optimistic about the future prospects of Macronix. "Our house maintains a buy" for the stock, he said. "We have a price target of NT$120 per share, so were still very positive," he said. The stock reached as high as NT$105 at the beginning of June, but has been falling sharply since then. Macronix is expecting July revenue of NT$2.5 billion to NT$2.8 billion, said Chen. Its NT$11.49 billion revenue for the first six months of the year marked a 79 percent rise over the same period last year. An analysis report by Fubon Securities in the middle June predicted Macronix net income for 2000 would rise to NT$7.9 billion from NT$906 million in 1999. Based on this projection, the report predicted an earnings per share of NT$3.08.
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