Samsung Proves Its Business Remains Sound Despite Note 7 Fiasco
This article by Jungah Lee for Bloomberg may be of interest to subscribers. Here is a section:
Samsung is emerging from its biggest corporate crisis, when reports of incendiary Note 7s forced the Korean company to kill its most profitable gadget. It still hasn’t revealed the results of a subsequent investigation into an episode that cost Samsung more than $6 billion and assured Apple Inc. of the lead in premium devices over the holidays. It’s now counting on its next marquee phone to repair its reputation.
“Despite the Note 7’s vacuum, Samsung acquitted itself well on the back of sound S7 sales,” said Lee Seung-woo, an analyst with IBK Securities Co. in Seoul. “After a softer landing in the first quarter, Samsung is on track for record June quarter profit with the new S8 coming to market.”
Operating income rose to 9.2 trillion won ($7.8 billion) in the quarter ended December, its biggest profit in three years, the Suwon, South Korea-based company said in preliminary results Friday. That compares with the 8.29 trillion-won average of analysts’ estimates compiled by Bloomberg in the past four weeks.
The heir to Samsung’s empire is being accused of taking part in a bribery scandal yet the share continues to outperform suggesting this news was already priced in. Perhaps more important is the fact Samsung was awarded more US patents last year than any other company. That suggests it at least has the potential to improve on its product line even after the Note 7 debacle.
The share broke a three-year progression of lower rally highs in July to reassert medium-term demand dominance. It is becoming increasingly overextended relative to the trend mean but a sustained move below KRW1.6 million would be required to question potential for additional upside.
The broad Kospi Index was also among today’s best performing national stock indices and is testing the upper side of a five-year range.
Posco, one of Asia’s largest steel producers has held a progression of higher reaction lows for most of last year and is currently bouncing from the region of the trend mean.
Trading has been halted in Hanjin Shipping following an almost 200% rally from deeply depressed levels over the last week. The global shipping sector is depressed to put it mildly. A significant number of companies are trading at fractions of book value and are ripe for takeovers if debt can be restructured. Shipping is a sector leveraged to global growth so with economic figures improving there is scope for recovery.