Management raised 2Q09 guidance close to our forecast: Chartered raised its mid-point 2Q09 revenue guidance from US$327 million to US$343 million, implying a 41% QoQ vs. previous forecast of 34% QoQ. The company commented that the primary reason for this upside would be from the improving demand for mature technologies. Thus, Chartered guided for a higher utilization (61% vs. 58%) but a lower ASP (US$912 vs. US$918). Gross margin increased by 3% to 8% accordingly, resulting in a 17% increase in earnings. Overall, the bottom-line number has been revised closer to our previous estimate.

Communication segment is the major upside for 2Q guidance: From the application perspective, we believe the major upside for Chartered’s 2Q09 guidance should be the Communication segment. Our channel checks suggest some RF chips in handsets can be lifted together with favorable handset demand as other top foundries, and some more adds from the wireless products, such as Bluetooth.

Currently tracking for mid-to-high single digit growth in 3Q09 supported by 12” wafer demand: We believe Chartered is currently tracking for mid-to-high single digit growth in 3Q09 especially due to demand for 65nm. Demand visibility for the mature technology nodes remains low.

Maintain Neutral, stock is on AVOID side of AP Tech Core & Trading Portfolio: Chartered’s stock price has gone up by 48% in the Singapore market and by 40% in the US market post its earnings conference. We believe it has reflected the improving outlook for 2Q09 and the more sustainable financials given the successful right offering in early April. However, we are still cautious about the end-demand in 2H09 and the likely negative impact of order correction for wafer shipment post mid-August. Key risk is the dramatic recovery in 2H09.