Takeover denied. Chartered officially denied The Business Times’ report that it has received a S$2.45b bid from Advanced Technology Investment Co. (ATIC), a technology investment company wholly owned by the government of Abu Dhabi to buy Temasek Holdings' 62% stake at between $2.40 and $2.60 a share. Nevertheless, Chartered mentioned that management will from time to time engage in discussions concerning opportunities and strategic directions of the company.

An ideal pair if successful: ATIC already owned GlobalFoundries through a JV with Advanced Micro Devices (AMD). The deal, if successful, will immediately lift ATIC’s Global foundries market positioning with an Asian footprint and proven capacity. Its only manufacturing base now is in Dresden, Germany. Furthermore, there is access to Chartered’s bigger pool of ready customers. For Chartered, other than a stronger financial backing, the new relationship bodes well given the possibility of spillover orders from AMD, which could instantaneously fill spare capacity and boost its operating performance.

Semicon recovery remains on track. Apart from consecutive monthly growth in semicon Book to bill ratio from 0.47 in Jan to 0.65 in April, chip maker Marvell (also Chartered’s customer) last night topped consensus estimates for Q1 ending May 09 and indicated improvement in near term order patterns. Elsewhere, Qualcomm lifted revenue forecast on 3G related demand and TSMC continues to call back laid off workers. In view of continuous improvement in the industry, we have rolled our valuation peg to 1.3x P/B (mid cycle valuation). Consequently, our new TP is S$3.50 (~60% upside). Upgrade to Buy.