BUY OR SELL-Samsung at record highs; investors play memory game

* Shares at record high, up 19 pct from Feb lows

* Earnings seen rising for next few quarters; peak in Q3?

* First quarter earnings guidance due Tuesday
(For more BUY OR SELL articles, click [BUYSELL/])

By Miyoung Kim and Jungyoun Park

SEOUL, April 5 (BestGrowthStock) – Shares of South Korea’s Samsung
Electronics Co Ltd (005930.KS: ), the world’s biggest electronics
firm by revenue, have risen 19 percent in just five weeks on
expectations for robust earnings growth.

Stronger-than-expected demand for personal computers and
limited supply growth by smaller players have lifted prices of
Samsung’s bread-and-butter memory chip prices, raising
expectations it will post record earnings this year.

Reflecting growing optimism, shares of Samsung, due to
report its first-quarter earnings guidance on Tuesday, have
recently outperformed the broader market, but are they set to
rise further or is it time to cash in on the gains?
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^ For graphic on results forecast:
http://link.reuters.com/bat46j
For graphic on shares: http://link.reuters.com/cat46j
For graphic on market share: http://link.reuters.com/fum94j
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STRONGEST MEMORY RESULTS IN RECENT MEMORY

Samsung’s stock closed up 1.5 percent on Monday at a record
870,000 won, rising 19 percent from a low on Feb. 26 and
trading well above the 20-day moving average at 762,750 won, a
bullish short-term technical sign.

“The shares could rise further as markets have not yet
fully priced in good news such as strong earnings growth,” said
Park Young-ju, an analyst at Woori Investment & Securities.

“Some foreign investors still appear to have doubts about
the second half outlook for the global IT industry in general
but they’ll steadily increase their exposure to Samsung as its
earnings will continue to grow to peak in the third quarter.”

Foreign investors own around 49 percent of Samsung, little
changed from end-2009, but well below a peak of 60 percent
marked in April 2004.

Analysts expect profits from the chip division to have made
a spectacular turnaround and account for half of Samsung’s
estimated consolidated first-quarter operating profit of 4.1
trillion won.

Samsung’s chip unit, which makes computer memory chips and
the NAND flash memory in Apple Inc (Read more about Apple stock future.)’s (AAPL.O: ) new iPad, swung
to a deep loss a year ago when the sector was hit by its
worst-ever downturn.

“Strong quarterly profit momentum is expected to
continue… as DRAM contract prices will likely increase in Q2
on spot price strength that began in March,” said Jin Sunghye,
a Shinhan Investment Corp analyst.

“Memory chip prices will continue to trade strong into the
third quarter when seasonal demand is strong.”

Sellside brokers are nearly universally positive on
Samsung, the world’s top maker of memory chips and LCD panel.
Of 44 analysts, 42 rate the stock either a ‘strong buy’ or a
‘buy’, according to StarMine, a Thomson Reuters company.

Analysts have also raised their 2010 earnings estimates,
with the average operating profit forecast at a record 16
trillion won this year, up 3 percent from a month ago.

Samsung, which is valued at around $110 billion, leads
global tech rivals such as Sony Corp (6758.T: ) and Elpida Memory
(6665.T: ) in earnings recovery and market competition.

PEAK COMING

Some analysts said the dizzy run-up in Samsung’s shares,
which rose 77 percent in 2009, and a cautious outlook for the
global electronics sector might bring the rally to a halt.

“Shares will possibly peak out this quarter and then head
for correction as the market will start getting worried about
DRAM oversupply,” said Seo Won-suk, an analyst at NH Investment
& Securities. “DRAM chip prices have been unexpectedly strong
so far but there’ll be a significant downward pressure starting
from the fourth quarter as a result of increasing supplies.”

Along with other electronic shares, Samsung stock is
overbought, with the relative strength index (RSI) trading at
76, above the 70 threshold where it may be considered
overbought and a signal that it may soon come under pressure.

Samsung’s lofty RSI compares with 77 for world’s No.2 LCD
maker LG Display (034220.KS: ) and 83 for No.2 memory chipmaker
Hynix (000660.KS: ).

Samsung stock has been investors’ darling in the absence of
chance to invest into debt instruments offered by Asia’s most
valuable technology firm in recent years. With more than 10
trillion won in cash or cash-equivalent assets at hands,
Samsung has shunned issuing new bonds since the last of its
paper matured in 2004.

“If Samsung says they would go to the debt market, it’s
going to be huge news and would get strong response, because
there have been few offerings by blue chip companies,” said a
fixed-income trader.

Major risk factors for export-oriented Samsung continue to
be its weak presence in the lucrative smartphone business and a
potential slowdown in flat-panel display and chip businesses as
rivals join Samsung to increase investments, which could derail
the nascent recovery in the technology sector.

Japan’s Panasonic Corp (6752.T: ) is reportedly planning to
bring forward mass production of LCD panels from its new
Japanese plant by three months, while LG Display is investing
$1.3 billion to add a new LCD production line. [ID:nTOE62R00E]
[ID:nTOE62B01W]

“Samsung is seen making aggressive investments… but if
memory chip sector faces a slowdown, its investments could be
rendered costly and ineffective,” said Shin Jin-ho, head of
equity at Midas Asset Management.

Stock Market Basics

(Additional reporting by Chang Tae-min; Editing by Lincoln
Feast)

BUY OR SELL-Samsung at record highs; investors play memory game