RESEARCH ALERT-Salomon upgrades Taiwan's TSMC, UMC to "buy"
AIPEI, April 12 (Reuters) - U.S. investment bank Salomon
Smith Barney raised on Thursday its investment ratings for major
Taiwan semiconductor makers on hopes of improvement in
inventories and demand, after upgrading their U.S. counterparts.
Salomon Smith Barney raised its rating on Taiwan
Semiconductor Manufacturing Co (TSMC) 2330.TW TSM, the
world's largest microchip foundry, rival United Microelectronics
2303.TW UMC and chip supplier Realtek 2379.TW to "buy"
from "outperform," Salomon Smith Barney semiconductor analyst
Andrew Lu said in a research note.
"This is largely due to expectations of improvement in
inventories environment and PC sector demand in the second half
of 2001," the note said.
The investment bank set a price target of T$90 for TSMC and
T$85 for UMC in the next 12 months, which were higher than the
original target of T$80 and T$65, respectively.
The 12-month target price for Realtek was T$250, also up from
the original forecast of T$180, the investment bank said.
"We think the third quarter will be the worst period for the
sector but it will recover in the fourth quarter," Lu, the
investment bank's director and head of regional semiconductor
research department, told reporters.
"The PC sector will recover first. After a slow second
quarter, the PC sector will revive from the third quarter, which
will lead a broad recovery in the technology sector," Lu said.
However, Salomon Smith did not suggest investors buy TSMC
shares for the time being.
"We agree that there are more downside risks on share price
and fundamentals for TSMC for the next 3-4 months on an absolute
valuation basis," Lu said in the note.
"However, for investors with a longer investment horizon, we
believe that there will be opportunities to accumulate TSMC
shares in the T$60-$70 range over the next few months as trough
results should emerge," Lu said.
Salomon Smith forecast that TSMC's earnings per share (EPS)
would reach T$1.93 and T$4.9 in 2001 and 2002, respectively.
It cut on Wednesday its 2001 EPS estimate for UMC by 34
percent to T$2 from T$3.03 and reduced his 2002 forecast by 12
percent to T$4.40 from T$5.00.
Salomon Smith also maintained "buys" for IC assembly and test
company ASE TEST ASTSE, rival Siliconware Precision
Industries 2325.TW and chipset designer VIA Technologies.
On Thursday, shares of TSMC ended up T$3.00, or 3.6 percent,
at T$86.00, while those of UMC gained T$1.50, or 3.1 percent, at
T$50.50, compared with a 1.2 percent rise on the main TAIEX
<.TWII> market.
Salomon Smith Barney said on Wednesday it was upgrading the
U.S. semiconductor sector to "outperform" from "neutral." It
raised top computer chip stocks to "buy" from "hold," including
top-tier firms such as Intel INTC, Micron Technology MU
and Texas Instruments TXN |
