Samsung

Take that, Kim Jong-il. Missiles launched by North Korea over the weekend barely caused South Korea’s stock market to break sweat on Monday. Then, dispensing with tradition, Samsung Electronics released a buoyant forecast for second-quarter earnings. That really put a rocket up the market. Shares in Asia’s biggest technology group leapt 5.5 per cent, while the benchmark Kospi bucked regional malaise to close slightly higher.

As the country’s biggest exporter, what is good for Samsung is good for Korea – and the prospect of a fivefold increase in consolidated operating profit from the first quarter is indubitably good. (Compared with a year ago, however, Samsung’s $1.7bn to $2bn projection is roughly flat.) It is a fair bet Samsung will deliver on its promises; after all, the second quarter closed last week, so management has full visibility. Semiconductors are at last benefiting from higher spot prices. Depending on size, Nand flash memory prices rose 36-84 per cent from the first quarter, according to iSuppli, a consultancy. Sales of liquid crystal display panels, which accounted for some 40 per cent of Samsung’s operating profit last year, are likewise rising: shipments rose 42.5 per cent quarter on quarter, according to WitsView.

Samsung’s stock price has risen 40 per cent this year, comfortably outpacing the broader market. Although its shares now trade on 1.4 times book value, that is still far from the 2.2 times that might be justified in a cyclical upswing. One niggle is that Samsung’s guidance refers to consolidated accounts, instead of the more usual parent-basis numbers. The switch allows Samsung to include more overseas subsidiaries, implying that is where most of the profit boost is coming from. Good news, in short, especially if it signals a broader tech recovery, but not enough to send Samsung’s shares ballistic.

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