UMC (2303)closed @39.10 +0.20 vol 112,840,060 most aactive
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July 31 net purchase 22,572,000 shares
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TAIWAN WEIGHTED closed @ 4354.52 +1.54 (+0.04%)
Day's Range :4328.53 - 4411.92
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Poor 2Q01 results, worse 3Q01 ahead,” NSC IC analyst Milton Huang’s views on UMC following UMC’s analyst conference held July 31, 2001. UMC reported a pretax loss of NT$3.05bn (pretax profits of NT$6.48bn in 1Q01), net loss of NT$1.85bn in 2Q01 (NT$6.47bn net income in 1Q01) on sales of NT$15.0bn (NT$23.6bn in 1Q01). Capacity utilization remained slightly above 40%, compared to some 70% in 1Q01, while investment income was a negative NT$853mn (NT$140mn in 1Q01). Gross margin fell to 15.7%, from 40.7% in 1Q01. UMC actually recognized heavy loss of NT$2.0bn from impairment of assets in 2Q01, NT$1.6bn loss on valuations of inventories and NT$0.4bn loss from impairment on long-term investments; therefore, its NT$3.0bn pretax loss was somewhat higher than expected. This is surprising, given that pure IC foundries should not report significant loss on inventory value. Apparently UMC must have sold its own memory chips, deviating from its role as a pure foundry, i.e., TSMC, to boost sales and profits in 2000, but got burned instead on high inventories. UMC's CFO indicated that the company won’t need to recognize further inventory loss in 2H01.
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Milton’s outlook for UMC: Unless we see some demand from the communication sector, we will continue to be NEUTRAL or even a bit conservative on UMC. Thus far, we have not seen any near-term signs showing that the semiconductor industry is ready to recover, and furthermore, it appears that UMC will continue to suffer from over exposure to the communications sector. However, looking forward, we recognize that UMC has become a leader in the development of 12" fabs and 0.13u technologies, which will allow it to remain competitive in the IC foundry industry. We see sales of NT$64.4bn, pretax loss of NT$1.2bn, net profits of NT$2.0bn, and an EPS of NT$0.15 for full-year 2001.
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In a research report, Merrill Lynch analyst Dan Heyler said he raised TSMC and UMC to "buy" from "accumulate" because of their low valuations and signs that the sector's fundamentals could bottom in the third quarter.
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