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June 27, 2017

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Local DRAM stocks up on Micron's gains

TAIPEI, Taiwan -- Shares of local dynamic random access memory (DRAM) chip-makers moved higher Wednesday after U.S.-based counterpart Micron Technology Inc. posted gains overnight amid optimism over the market's prospects, dealers said.

Nanya Technology Corp. (南亞科), seen generally as a market laggard, particularly attracted interest and played catch-up with Inotera Memories Inc. after foreign institutional investors were net buyers of Nanya shares a session earlier, they said.

As of 11:19 a.m., shares of Nanya had risen by the maximum daily increase of 7 percent to NT$7.25 (US$0.24), with 14.99 million shares changing hands, while shares of Inotera had gained 0.90 percent to NT$39.35 on trading volume of 52.72 million shares.

The weighted index on the Taiwan Stock Exchange (TWSE) was up 0.27 percent at 9,079.51.

Nanya and Inotera are both DRAM manufacturing arms of the Formosa Plastics Group. (台塑集團) Inotera is a joint venture between Nanya and Micron.

"The Micron uptrend served as a catalyst for the gains of Nanya and Inotera. As Nanya has been lagging behind other DRAM stocks, it played catch-up soon after the local bourse opened," KGI Securities analyst Phil Chu said.

"Because foreign institutional investors were net buyers of Nanya shares, many investors followed suit and chased prices this morning," Chu said. According to the TWSE, foreign institutional investors bought a net 1.83 million Nanya shares on Tuesday but sold a net 8.62 million Inotera shares.

Shares of Micron closed up 2.67 percent in the U.S. overnight after U.S. research entity ISI Group raised its target price on the stock to US$35 from US$30, saying the DRAM vendor remains one of its top picks as the company is well positioned in the industry.

DRAM's Robust Revenue Growth

In addition, The Street Quant Ratings, a U.S. stock rating services provider, has recommended a "buy" on Micron shares because of the DRAM maker's strengths in certain areas, such as its robust revenue growth.

"The positive comments on Micron reflected hopes that the DRAM industry continues to ride waves of solid demand from mobile device vendors, which has offset the weakness of the global PC industry," Chu said.

"Nanya and Inotera are two of the beneficiaries of such a trend in the industry as the two companies are gearing up to allocate resources to specialty DRAM production to meet demand for mobile gadgets," Chu said.

Chu said Nanya and Inotera are expected to continue to report a net profit for the rest of this year.

Nanya posted a net profit of NT$6.12 billion for the first quarter, sharply higher than the NT$3.96 billion in net profit it reported for the previous quarter, and its first quarter gross margin rose to 39.9 percent, up 22.1 percentage points from a quarter earlier.

During the same three-month period, Inotera's net profit rose 2 percent from the fourth quarter to NT$11.25 billion, the highest in the company's history. The company's gross margin for the January-March period rose to 54 percent, from 53 percent in the first quarter.

Inotera is scheduled to participate in an investor conference organized by the TWSE later in the day, and many investors have high hopes that the company will offer more positive leads on the DRAM business, Chu said.

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