Toshiba shares jump on brighter profit outlook
Mon Jan 9, 2006 11:35 PM ET
TOKYO, Jan 10 (Reuters) - Shares in Japanese electronics conglomerate Toshiba Corp. (6502.T: Quote, Profile, Research) hit their highest in more than 4-½ years on Tuesday, bucking a drop in the overall market, boosted by expectations for robust earnings.
Toshiba shares were up 4.49 percent at 792 yen in afternoon trade after climbing to 802 yen, a level not seen since May 2001. The Tokyo stock market's electrical machinery index was flat while the Nikkei average fell 0.86 percent.
The sharp gains come after the Nihon Keizai Shimbun business daily said on Monday Toshiba would likely post an operating profit of slightly more than 200 billion yen ($1.75 billion) for the year ending March 31, up from Toshiba's own forecast of 170 billion yen, driven by robust sales of its flash memory chips.
Goldman Sachs said the figures in the article were roughly in line with its expectations, but that operating profit for Toshiba's microchip division would likely be close to 120 billion yen, more than the 100 billion yen mentioned in the report, further stoking investors' expectations.
"We believe the article does not mark the exhaustion of good news regarding Toshiba, and we reiterate our outperform rating on the stock," Goldman said.
The group operating profit of 200 billion yen reported in the newspaper compares with the consensus of 198 billion yen in a poll of 18 analysts by Reuters Estimates.
A Toshiba spokeswoman said the newspaper report was based on speculation and that it would revise, if necessary, its earnings forecasts when it announces October-December results on Jan. 31.
Toshiba is the world's second-largest maker of NAND-type flash memory chips behind Samsung Electronics Co. Ltd. (005930.KS: Quote, Profile, Research) . The chips are widely used in digital cameras and portable music players including Apple Computer Inc.'s (AAPL.O: Quote, Profile, Research) iPod nano.
Market players said Toshiba's shares were supported not only by the strong earnings outlook for the current business year, but by expectations for extended growth into the next year.
"The semiconductor market has hit bottom and inventory adjustment for electronic components has run its course," said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management.
"The chip market as a whole may not stage a sharp recovery as it did before. But specialised products like Toshiba's NAND flash are most likely to meet strong demand and occasional shortage of supplies."
In the medium-term, however, Toshiba's NAND flash memory operations -- its cash cow business -- face a potential challenge from Intel Corp. (INTC.O: Quote, Profile, Research) , the world's largest microchip maker, and Micron Technology Inc. (MU.N: Quote, Profile, Research) , which agreed in November to set up a joint venture to make the hot-selling chips.
In 2005, Toshiba shares put on 60 percent, far outperforming the sector index's 28 percent gain. ($1=114.54 Yen)
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