Upward revision in 2Q09 guidance. Chartered Semiconductor had on Friday revised its revenue guidance upwards on the back of an incremental improvement in business, mainly from its mature technologies. 2Q09 revenue is now expected to come in at around US$338-348m (previous guidance: US$321-333m), while its net loss is likely to narrow to US$45-53m (previous guidance: US$54-64m). Utilization rate expectation, likewise, is raised to 59-63% from 55-61% as guided previously. This set of revised projections mean that 2Q09 revenue may grow at a faster 38.6-42.7% QoQ (31.6-36.5% QoQ previously) and that the net loss position is likely to improve significantly from US$98.8m seen in 1Q09.

Rebound in global semiconductor sales likely in 2010. In just the last three weeks, we also note that at least two industry watchers had raisedtheir 2009 global semiconductor sales forecasts amid better-than-expected1Q09 IC sales and views that the market had probably bottomed. Gartner,for example, now expects the 2009 industry revenue to fall to 22.4%, slightly better than its 24.1% decline projected in February. This was joined by estimates from World Semiconductor Trade Statistics (WSTS) and Semiconductor Industry Association (SIA), which were projected to hit a similar 21.3-21.6% decline. The most optimistic forecasts, in the range of 13-17% decline, came from VLSI Research and IC Insights. We think that these developments, though widely anticipated, are positive signs for apossible earlier-than-expected breakeven in Chartered's profitability and may herald a sooner-than-expected recovery in the semiconductor industry.Indeed, both WSTS and SIA, project that global sales are likely to rebound in 2010, with growth of approximately 6.5-7.3%.

Maintain SELL. We are now raising our FY09 revenue forecast by 9.6% to reflect the improvement in Chartered's 2Q09 business and a possible better outlook. In line with the strong re-rating in the semiconductor industry, we are also applying a 0.6x FY09F NTA to our fair value from 0.4x previously. While our fair value is raised from S$0.80 to S$1.40 (adjusted for share consolidation), we believe the sharp rally in its share price could have caused it to run ahead of its fundamentals. Noting that an increasingly high unemployment rate worldwide may hamper consumer spending and in turn the global semiconductor demand, we think that it is an opportune time for investors to lock in profit now than to bear any possible downside risks. As such, we maintain our SELL rating on Chartered.