MediaTek stock boosted by Q2 earnings prospects

ROBUST::Although sales are unlikely to grow as much as in the second quarter, peak season effects are set to keep boosting the firm’s bottom line, an analyst said

Staff writer, with CNA

Sat, Jul 13, 2013 - Page 14

Shares of MediaTek Inc (聯發科), one of Taiwan’s leading integrated circuit designers, moved higher yesterday on hopes that the company will report a significant improvement in its bottom line for the second quarter of this year, dealers said.

Shares of MediaTek gained 2.86 percent to end at NT$360, while the TAIEX closed up 40.95 points, or 0.5 percent, at the day’s high of 8,220.49 points.

“Judging from MediaTek’s better-than-expected second quarter consolidated sales, I think the IC designer will report about NT$4.2 in earnings per share [EPS] for the second quarter, sharply up from the first quarter,” Horizon Securities (宏遠證券) analyst Benson Huang (黃重善) said.

In the first quarter, MediaTek’s EPS stood at NT$2.79.

Other market analysts have forecast that MediaTek will post EPS of NT$4.5 for the second quarter and a gross margin of 43 percent, up from 42.1 percent in the first quarter.

In the period from April to last month, MediaTek’s consolidated sales rose 38.8 percent from the previous quarter to NT$33.28 billion (US$1.1 billion). The firm’s second-quarter sales beat the company’s own estimate of between NT$30 billion and NT$31.6 billion.

“The robust sales growth largely reflected solid demand for smartphone chips in the Chinese market,” Huang said. “In addition, tablet computer chips have become another driver of MediaTek’s sales growth.”

“Furthermore, MediaTek has secured orders from international brands such as Asustek Computer Inc (華碩) and Acer Inc (宏碁), which have become another revenue source for the IC designer in addition to Chinese unbranded mobile device suppliers,” Huang said.

In early May, MediaTek raised its tablet chip shipment forecast for this year to between 10 million and 15 million units, from an earlier estimate of 5 million to 10 million units, but its projection for total chip shipments for the year remained unchanged at 200 million units.

Huang said that although MediaTek’s sales for the third quarter are unlikely to grow as significantly as in the second quarter due to a relatively high base of comparison, the peak season effects of the period from this month to September are set to continue to strengthen the company’s bottom line.

He forecast EPS of between NT$17 and NT$17.5 for this year, up from the NT$12.90 MediaTek recorded last year.

“I suspect that foreign institutional investors will remain on the buy side for the stock amid optimism toward the IC designer’s profitability,” Huang said.

On Thursday, foreign institutional investors bought a net 635,637 MediaTek shares.

“However, as the stock has staged a strong technical rebound in recent sessions on foreign institutional buying, it is now faced with stiff technical resistance at around NT$358,” Huang added. “Investors had better remain cautious about possible profit-taking any time now.”