Fund injection plan offsets Q3 loss impact on shares of DRAM firm

Taipei, Oct. 25 (CNA) A fund injection plan lent some support to shares of dynamic random access memory (DRAM) chip maker Nanya Technology Corp. Thursday morning, offsetting the impact from the company's massive losses posted in the third quarter of this year, dealers said.

However, amid a supply glut in the global DRAM industry, concerns over the bottom lines of Nanya Technology and its peers remained in place, prompting investors to continue to dump their holdings in the sector, they said.

As of 11:33 a.m. shares of Nanya Technology had lost 0.68 percent to NT$1.45 (US$0.05), off an early low of NT$1.39. The benchmark weighted index was down 0.10 percent at 7,307.37 points.

"Investors have hopes that Nanya Technology's rich parent, Formosa Plastics Group, will inject funds into the unprofitable unit to take on the downward cycle of the global DRAM business," Horizon Securities analyst Benson Huang said.

Such optimism emerged after the company announced a day earlier that it is planning to make a private placement to issue up to 10.94 billion new shares to strengthen its financial structure and boost its book value, and Formosa Plastics Group will serve as the major buyer of the shares, Huang said.

"The fund-raising plan has helped Nanya Technology shares recoup most of their earlier losses caused by further losses for the third quarter," Huang said.

Nanya Technology incurred NT$10.09 billion in net loss or NT$0.64 in loss per share during the July-September period, a reflection of falling product prices. In the previous quarter, the company reported NT$6.68 billion in net loss, or NT$0.45 in loss per share.

Due to the large losses, the chip maker's book value per share fell to NT$0.12 at the end of September from NT$0.39 at the end of June.

Huang said that as there are few signs that the DRAM industry will make an immediate turnaround, it is possible that Nanya Technology will incur more losses in the fourth quarter.

"Without any fund injections, Nanya Technology's book value per share could fall further to below zero and a delisting of its shares from the main board could be inevitable," Huang said.

"But I am still worried about lingering uncertainty over global demand in the DRAM industry," Huang said. "Under these unfavorable circumstances, I doubt whether Nanya Technology's parent will continue to pour more money into such a black hole," Huang said.

Amid pessimism toward the DRAM Industry, shares of Inotera Memories Inc. fell 3.02 percent to NT$4.17 after the firm incurred NT$4.39 billion in net loss, or NT$0.81 in loss per share, for the third quarter, extending from NT$2.98 billion or NT$0.53 in loss per share recorded in the second quarter.