BUY OR SELL-Asia tech gadget makers: Flee or fancy?

* Strong demand to keep shares buoyant until Q3

* Oversupply, and a shortage of some parts, loom longer
term

* Sony, Samsung favoured
(For more Reuters BUY OR SELL stories, click on [BUYSELL/])

By Baker Li

TAIPEI, April 7 (BestGrowthStock) – Shares in Asian PC and LCD TV
makers, including Sony Corp (6758.T: ) and Samsung Electronics
(005930.KS: ), have hit new highs recently as they ride
unrelenting consumer demand for new computers and flat-screen
TVs.

The tech firms are to book bigger profits this year as new
flat-screen TVs at affordable prices tempt consumers and demand
for new and sleeker computers also rises.

On the downside, an oversupply of LCD panels, a shortage of
some parts that could crimp output, and the advent of Apple’s
(AAPL.O: ) iPad, which could displace popular mini netbook
computers, could hurt their shares.

LOOKING GOOD UNTIL Q3

Shares of Sony hit a 1-1/2-year high late last month, while
Samsung, the world’s No.1 maker of memory chips and LCD
displays, hit an all-time high [ID:nTOE63405G]. Taiwan’s Acer
(2353.TW: ), the world’s No.2 PC vendor, rose to a 2-month high
in March.

“(Growth) momentum on LCD TVs is strong and we don’t have
to worry too much,” said John Chiu, a fund manager at Fuh Hwa
Securities Investment Trust in Taiwan, adding it would be safe
for investors to hold consumer plays such as Sony and Samsung
until the third quarter, the sector’s peak sales season.

Chiu declined to identify individual stocks in his funds,
only saying he owns shares of some panel parts makers.

Jerry Lee, a fund manager at Yuanta Securities Investment
Trust in Taipei, said Sony remains attractive even after the
recent run-up, based on a price-to-book ratio of 1.23 times his
earnings forecast, lower than the average 2-3 times for
electronics shares in Taiwan and South Korea.

“There’s a turnaround story,” said Lee, who manages about
T$10 billion ($313 million) worth of equity assets for clients.
Sony is among Lee’s top picks.

Of 44 brokers tracked by Thomson Reuters I/B/E/S, 42 rate
Samsung a ‘buy’ or a ‘strong buy’. Most also rate Sony a ‘buy’.

Sony reported a first profit in five quarters
[ID:nTOE61103O] while Samsung said it was on track to top
market forecasts with a record quarterly profit.
[ID:nTOE63405G]

CAUTION, RISKS AHEAD

Analysts say the LCD industry could risk falling back into
oversupply later this year or next year if makers invest the
huge amounts in production that they did in the previous boom.

For PC makers, the double negatives include the much-hyped
iPad launch [ID:nSGE6340DJ] and a shortage of key components
such as DRAM memory chips after last year’s downturn forced
many chip makers to delay investing in new production
equipment.

“(This is) a minus for those who assemble PCs and other
finished products,” Mizuho Investors Securities analyst Yuichi
Ishida said. “Parts shortages could cause some companies to
fail to earn the kind of profit they expected or to lose some
business opportunities.”

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For Graphic on DRAM prices:

http://graphics.thomsonreuters.com/10/04/TW_DRAM0410.gif)

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

Such concerns have driven investors away from some smaller
PC firms, including netbook pioneer Asustek Computer (2357.TW: )
and Compal Electronics (2324.TW: ) in Taiwan and China’s Lenovo
(0992.HK: ).

Merrill Lynch has rated Asustek ‘underperform’ with a
target share price of T$52.17, about 7 percent below its
current level, citing pressure on margins from component and
labour shortages.

“We don’t touch PC shares as concerns over parts shortages
still exist,” said Bevan Yeh, a fund manager at Prudential
Financial Securities Investment Trust.

“If PC companies are too optimistic about demand and find
out it’s not as strong as they’d expected in the third quarter,
that won’t be good news,” Yeh said, adding his funds mostly
invest now in optical-related and solar shares.

In another warning sign, the recent rise in some shares has
left them looking technically overbought on the charts.

Sony’s 14-day relative strength index (RSI) neared
overbought territory around 55 on Tuesday. Samsung’s RSI was
high at 75.

Stock Market Basics

(Additional reporting by Kiyoshi Takenaka in TOKYO)
(US$1=T$31.7)
(Editing by Jonathan Standing and Valerie Lee)

BUY OR SELL-Asia tech gadget makers: Flee or fancy?