No foundry left behind: 2Q09 utilization near 80%, 300mm fab fully booked. We believe CHRT will see 2Q09 utilization of 75-80% in terms of wafer shipments, on the basis of over-booked 12" Fab 7 and more than 70% utilization in 8" fabs. The main drivers of 12" wafer orders are CDMA handsets, WLAN and China TVs, and the booking across other 8" fabs has also improved with handset power management IC and consumer IC.

Not likely to expand 12" fab capacity so soon, but will probably convert more 90nm/0.13um capacity into 65nm capacity by the end of 2Q09: We believe CHRT will not expand top-line 12" fab capacity due to financial concerns. However, we do believe that CHRT will, as planned, convert its 0.13um and 90nm fabs with probably as high as 70% of the total 25-28K 12" wafers per month by the end of 2Q09.

Profitable at 75% utilization in 2Q09? Possibly: CHRT’s depreciation will be $20MM lower in 2Q09 than in 3Q08, the last quarter in which it generated similar revenues. That translates into almost a five-percentage-point improvement in margin. Indeed, it is possible for CHRT to bring its operating breakeven to 75% in 2Q09, ahead of management’s guidance of doing so by the end of 2009. While 75% operating breakeven is nowherenear enough to create a self-sustaining business model, it is still an improvement as a result of capex reduction.

Upgrade to Neutral, rights issue done, next capital overhang in 2010: We upgrade CHRT to Neutral with a raised Dec-09 price target of S$0.15 (CSM SP)/US$1.0 (CHRT US), based on 0.6x FTM book. CHRT is relatively cheap, so there could be upside if the market starts to believe CHRT can refinance its $542MM maturing debt in 2010. We estimate that CHRT will have around $660MM in cash by the end of 2009 despite the US$157.5MM debt payback in 2009, thanks to the US$300MM rights issue. While rights issues might have left a sour taste for previous investors, a few new investors might consider taking the plunge.