Chartered Semiconductor

27 April 2009


Chartered Semiconductor might have reported a net loss of US$98.8 million for Q1 2009, but it gave projections that exceeded analysts' estimates.

For Q1 2009, Chartered's revenue was down 37% to US$243.9m. The microchip maker gained US$142m in cash from operations compared to US$58.7m in the previous year. It made a net loss of US$98.8 m compared to a net profit of US$$2.4m a year ago. This means it has been making a loss for the third consecutive quarter. It made a net loss of US$114ln in Q4 2008.

Chartered projected that its Q2 2009 revenue may come in higher, at between US$321m to US$333m, but also forecasted a net loss of between US$54 m to US$64m for Q2 2009.

CEO Chia Song Hwee said Chartered's customers are still very cautious, as it is too early to say whether the chip market had bottomed.

Chartered Semiconductor's P/B ratio of 0.60x is below 1x and presents good value. In other words, investors would be getting one dollar's worth of value but paying only 60 cents.

As stated above, Chartered gave very specific forecasts for Q2 2009. The chipmaker is a rare SGX-listed company in that it never fails to provide forecasts for revenue, gross profit, capacity utilization and net profit, among others.

Mr Chia said that while Chartered is adjusting its short-term business plans to meet additional demand for customers, it will still focus on lowering its breakeven point and watch its cash and liquidity position.

Although it has good disclosure policies, Chartered does not have a habit of giving out dividends.

Chartered's free cashflow for FY2008 was a negative US$3.4m. This was lower than its FY2007 free cashflow of negative US$287.9m. It has been registering negative free cashflow for over a decade.

Chartered's overall fab utilization rates dropped to only 38% in Q1 2009, compared to 86% in the previous year and 59% in Q4 2008. It projects about 58% fab utilization rates in Q2 2009.

But it might not be so confident of meeting that target now that the unexpected outbreak of the swine flu has made investors cautious and put a dent on hopes that the economic downturn was easing.

It is not clear how bad the outbreak will be, but orders might not flow so fast if Chartered's customers are scared off by the potential of a worse-than-expected swine flu outbreak.

Analysts surveyed by Reuters have on average an UNDERPERFORM call on the stock with a target price of US$0.09.

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