Set to benefit from any turnaround in the semiconductor space. Any recovery in the electronics sector should be first felt in the semiconductor space, given that semiconductors are regarded as the frontrunner of the whole technology cycle. Recently, some of the IT market research firms (Gartner, SIA, iSuppli, etc) have upped their forecasts for semiconductor sales in 2009 – this is expected to be beneficial to Chartered. Currently trading at 0.95x FY09 P/B and assuming that it trades up to the industry average of 1.2x FY09 P/B, we have a BUY recommendation on Chartered with target price of S$2.66.
Customers experiencing an improving trend. Several of Chartered’s major customers have upgraded their forecasts recently due to better-than-expected demand. Qualcomm, which contributes more than 10% to Chartered’s net revenue, raised its revenue estimate for 3Q09 by around 9% while Texas Instruments also boosted its top and bottomline forecasts for 2Q09.

Industry peers seeing recovery. TSMC recently revealed plans to increase its capex by 26% and added that the worst is already over for the semiconductor industry while predicting that the decline in global chip sales for 2009 would be 20%, rather than its previous projection of 30%. Similarly, Chartered itself had upgraded its earnings forecast for 2Q09 due to an improvement in its business operations.

Share price may not be reflective of fundamentals. Just only recently, it was rumoured that Temasek had received a takeover offer for Chartered at a price range of S$2.40 – 2.60 per share from a technology investment firm which is in turn fully owned by the Government of Abu Dhabi. While this event ultimately did not materialise, there were further rumours that Temasek had found the bidding price to be too low. Should this piece of news be true, this would indicate that Temasek regards Chartered’s share price as undervalued.