AFP
(Adds more analysts comments, updated share price move)
SEOUL (Dow Jones)--Samsung Electronics Co. (005930.SE) said Monday it expects second-quarter sales to come in higher than a year earlier, underpinning suggestions that Asia's flagship technology companies are seeing a recovery after posting steep losses in the fourth quarter of 2008.
Samsung Electronics, South Korea's biggest company by market capitalization, said it expects sales for the three months ended June 30 to come in between KRW31 trillion and KRW33 trillion, up from KRW29.1 trillion a year earlier.
Operating profit is expected to be between KRW2.2 trillion and KRW2.6 trillion, compared with KRW2.4 trillion registered in the second quarter of 2008, the company said.
All figures are on a consolidated basis.
Many analysts now believe the tech industry may have hit bottom late last year, although there's still caution about the sector's prospects given the global economy's uncertain future.
Nevertheless, investors were encouraged by the announcement, pushing Samsung shares sharply higher to finish 5.5% up at KRW634,000, outperforming the Kospi's 0.6% gain.
Samsung didn't provide a reason for the expected better performance in its guidance, which it provided for the first time in an attempt to reduce confusion arising from competing market forecasts. But analysts widely expect the company's performance will have improved from the first quarter thanks to stabilizing prices for memory chips and liquid crystal displays.
The company added that the actual results, due July 24, may differ from the guidance as it hasn't completed an audit.
Most analysts saw the estimates as a big surprise, with the guidance setting a positive tone for the upcoming results of global technology firms.
"The announcement means optimism has spread across the overall (IT industry)," said Brian Park, an analyst at Prudential Investment & Securities. "The likely improved second-quarter performance is expected to continue into the third quarter due to continued price run-ups in the semiconductors and LCDs."
However, Park added the lingering uncertainties surrounding the global technology sector aren't likely to abate just yet as weak demand persists due to the prolonged economic slump worldwide.
Meanwhile, Citigroup said in a report that Samsung will continue to surprise the market in the second half of the year, largely thanks to a strong turnaround in the memory semiconductor and LCD divisions.
"We expect upward earnings revision cycle will continue to drive a stock price uptrend in the coming quarters," added Citigroup, which has a Buy rating for Samsung shares, with a target price of KRW810,000.
According to data from DRAMeXchange, a Taiwanese online chip clearinghouse, the average spot price of the mainstream 1-gigabit double-data-rate-two chip that runs at 667 megahertz rose 13% to US$1.08 on June 30, up from US$0.96 in Apr. 1. The mainstream 16-gigabit NAND chip spot price stood at US$3.95 on average, up from US$3.47 on the first day of April.
In the first quarter, Samsung posted consolidated sales of KRW28.67 trillion, up from KRW26.01 trillion a year earlier, while its operating profit fell to KRW470 billion from KRW2.57 trillion a year earlier.
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