Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : WDC/Sandisk Corporation -- Ignore unavailable to you. Want to Upgrade?

To: Unwelcomeguest who wrote (55088)	6/5/2013 12:08:27 PM
From: Sam	Respond to of 60323

Here is Merrill's analyst, Simon Woo, summary and reaction to Micron's presentation. FWIW, I agree with him. Key takeaways: Good cycle, Elpida M&A, low capex Kipp Bedard, vice president of investor relations at Micron Technology, presented at our 2013 Global Tech Conference in San Francisco on 4 June. The key takeaways: (1) Diversification of sales (DRAM capacity conversion into NAND) and target applications (higher growth in SSD, consumer and mobile vs. PC/server); (2) Chip supply constraints (low bit growth in both DRAM and NAND markets) coupled with industry consolidation, low capex and difficulties in using new tech (e.g., 3D impact minimal even in 2014); (3) Strong demand from China OEMs which continuously prevents hardlanding of memory spot prices (further rally possible); (4) Substantial benefit from Elpida M&A (while the deal-closure date is not well guided, after approval from the Tokyo High Court in May, it will then need approvals from US Bankruptcy Court) due to yen weakness, low depreciation cost and proven tech (3xnm mobile DRAM already mainstream; 25nm deployments possible in 2H in our view); and (5) Disciplined capex spending to pay back debts – no more new fab construction, Elpida fab (100k/80k wpm from Hiroshima/Rexchip) efficiency improvement and back-end capacity expansion (in China/Singapore) are all more important. Kipp also shared some industry data points: the manageable level of channel inventories (of DRAM and NAND); per box memory content increase among PCs, tablets, smartphones, SSDs and game consoles; competitors' conservative bit growth targets or capex spending, including at Korean and Japan players. Overall, we conclude Kipp's presentation and investor meetings are positive, pointing to a full-fledged earnings recovery, particularly after the Elpida deal. Our thoughts: Consensus too low but ASP hike limited Net-net, we fully agree on management's positive stance on Micron's earnings recovery (much stronger than consensus likely: our EPS estimates are over 2x higher), favorable competitive landscape and new growth (in China, mobile, SSD, etc). However, memory chip prices should not increase further due to OEMs' resistance or potential de-spec (lower memory contents at higher chip prices). That said, stable ASP or better-than-normal spot-price corrections (down 10-20% pa rather than 20-30%) can easily lead to margin recovery at new tech (20-30% cost reduction pa) and Elpida (70-80% lower depreciation cost vs. new fab). 2H FY13 results (Mar-Aug) will likely reveal mid- to up-cycle level of OP (3Q US$220mn, 4Q US$408mn) and then up-cycle in FY14-15. Investment thesis: One of our global top picks Micron (up 85% YTD) has massively outperformed not only SOX (up 23%) but also Asian peers. That said, its multiples are still low based on our FY14 estimates (P/E 6.2x, PBR 1.2x). In our view, it seems to be too early to take profit on Micron's share-price rally given a few more upcoming catalysts are anticipated: such as the Elpida deal completion, consensus revisions, FCF hike.