Nov. 13, 2009 (The Korea Times) -- By Kim Yoo-chul
Staff Reporter
Hynix Semiconductor has no plan to float new shares in 2010, an executive of the company said.
"Our cash-equivalent assets are expected to reach some 2 trillion won by the end of this year. Therefore, it is totally groundless to say that Hynix is considering issuing new shares to secure funds," Kim Jung-soo, the company's investor relations chief, told The Korea Times.
Referring to rising computer chip prices, Kim said the financial soundness of the world's second-biggest memory chipmaker has been rapidly stabilizing.
"It could be enough to run the memory business, with funds coming from our biggest clients. Chip demand is tight, while the supply is balanced," said the senior executive.
"Hynix won't issue new shares in 2010 as well."
Separately, a senior official at the Korea Development Bank (KDB), one of the main creditors of Hynix, said it was feeling positive about the company's financial soundness due to favorable market conditions.
The remarks came a day after Hyosung dropped its bid to buy a controlling stake in Hynix due to market worries over whether or not the local conglomerate had the management capability to control Hynix, which is around four times bigger in terms of market capitalization.
Hynix's profit structure is highly influenced by the movement of chip prices and market conditions, as memory chips are considered volatile commodities.
The firm's plan not to issue new shares is different from its overseas rivals. Japan's Elpida plans to issue up to 55 million shares to mend its financial health in preparation for an eventual global DRAM industry reorganization.
"Technology advancements and sizable market shares are helping us get more computer chip orders," Kim said. Hynix follows Samsung Electronics in the global computer memory chip industry.
Hynix, led by CEO Kim Jong-kap, turned into the black in the latest quarter for the first time in two years as major PC makers ordered the chip maker to supply more advanced chips amid easing economic worries.
In line with the recent upward market movement, contract prices of dynamic random access memory (DRAM) chips, which are widely used in personal computers, increased in the early part of November, DRAMeXchange, a Taiwanese online chip clearinghouse, said.
The average price for the mainstream 1-gigabit double-data-rate-two (DDR2) chip, which runs at 667 megahertz, rose by 15.5 percent to $2.38 in late October, according to the firm.
The average contract price of the 1-gigabit double data rate 3 (DDR3) chip, which runs at 1066 megahertz, rose 16 percent to $2.25 in late October.
Citing stabilizing DDR2 chip prices and rising demand for energy-efficient and faster DDR3 chips, analysts expect Hynix to boost its operating profit in the fourth quarter of this year.
"Citing a strong outlook for the memory business, we revised our operating profit forecast for Hynix in 2010 to 2.42 trillion won from 2.19 trillion won, and increased its 2011 forecast to 2.52 trillion won from 2.41 trillion won," Citi (NYSE:C) , a U.S.-based brokerage, said in a letter to clients.
Another U.S. brokerage, Merrill Lynch, also upgraded its rating on Hynix Semiconductor (OOTC:HXSCF) , to "buy" from "underperform," and tripled the target price for the chip maker to 30,000 won.
"Our new forecast reveals a full-fledged recovery in 2010-11," it said in a recent report.
