While the correction of the overheated taipei stock exchange is significant, even if UMC value was halved, SIII's UMC holdings is still very good. Also, the Taiwan government is VERY cash rich and is willing to step in to support the market massively to stop any such metdown. But in a true panic, this will be an interesting battle of epic proportions, comparable to the HK monetary authority intervention in the HK markets.
The problem is their core chip business, still bleeding massive red ink for many quarters now. W/O the chip business dragging down their results, this is a very attractive value play. But every quarter that their chip division bleeds lowers their value.
Why is this a good value play?
1. Take their UMC holdings and that 42M amortized over next 5Q. That's not bad.
2. RioPort could be sold for another one time windfall. There are lots of companies that buy other companies, sell off valuable parts, shut down unprofitable divisions and still make tons of money. The Diamond acquisition if executed correctly, could be very profitable.
3. There is a chance that the core chip division starts turning a profit. But as you'll see below, this last one is a risky gamble.
Why is this a dangerous stock?
1. Couple of yrs ago, previous SIII management was accused of serious accounting irregularities. (But you can't really say that you own 250M shares of UMC if you don't have them. Even though I still don't trust these guys, the chance of another potential fraud here is very low.)
2. Yahoo still reports them as having EPS of -us$2.57. Using 53M as # shares that's -$136M --- a big chunk of the UMC holdings. It doesn't take many more quarters of losses like that in their core business to whittle down their value. I don't think this # is correct now.
3. Savage4 is positioned between a TNT2 and an intel Whitney. Whitney has to stumble badly for savage4 to gain significant volume in the next 6 months. This is why the chance of their core business turning around is very slim. I'd pay close attention to nvidia's next sales figures to see if their volumes are > S3's. This would indicate further market share erosion.
quote.yahoo.com
Summary
Based on core business and growth potential, NVDA is a better buy. But based on value...
Buy. [Very very cautiously with one wet finger up in the air]
Here's the current update on the taiwan situation.
scmp.com |
