Chartered says to miss Q4 sales target
Monday September 16, 5:26 am ET
By Jennifer Tan
(Recasts, adds closing share price, quotes)
SINGAPORE, Sept 16 (Reuters) - Chartered Semiconductor Manufacturing's (NasdaqNM:CHRT - News) shares tumbled more than six percent on Monday after it delivered a widely expected warning it would miss fourth-quarter revenue targets and its stock went ex-rights.
The world's third-largest contract maker of microchips, which blamed the projected October to December revenue shortfall on weakening customer demand, stunned investors earlier this month with a massive US$633 million eight-for-10 rights issue.
The issue was the Singapore-based firm's third fund-raising effort in as many years as it tries to keep up with Taiwan Semiconductor Manufacturing Co Ltd (Taiwan:2330.TW - News; NYSE:TSM - News; TSMC) and United Microelectronics Corp (Taiwan:2303.TW - News; UMC), the world's top two microchip contract makers.
"It's not surprising Chartered will miss its fourth-quarter revenue guidance since its Taiwanese rivals are also looking at a weaker Q4, and Chartered's customer base is so much smaller than theirs," said HSBC Securities analyst Warren Lau.
Lau, who has a reduce call on the stock, has raised his 2002 loss forecast for Chartered to US$416 million from $400 million and his 2003 loss estimate to $356 million from $233 million.
Chartered closed down 7.9 cents at a record low of S$1.16 in active volume of 10.7 million shares. Based on Friday's closing price, the theoretical ex-rights price should be S$1.24.
Although the stock was now very cheap, having fallen below its ex-rights book value of around S$1.28, there were few catalysts to drive it higher, analysts said.
"I have a hold rating on Chartered but an accumulate for both TSMC and UMC," said Pranab Kumar Sarmah at Daiwa Institute of Research.
"I think investors are better off putting their money into the Taiwanese foundries as they are fundamentally better, both now and on a long-term basis."
MORE RED INK TO COME
Chartered, which has a secondary listing on Nasdaq, has been bleeding red ink for six consecutive quarters. It posted a record loss of $384 million last year and lost another $219 million in the six months to June 30.
In April, the company set a target of doubling its revenues from the first quarter to the fourth quarter of 2002. To achieve this, fourth-quarter revenues would need to grow 20 percent sequentially.
"Based on reduced demand projections received from a number of our customers since our mid-quarter update...we now believe the fourth quarter target is no longer achievable," it said on Monday in a statement accompanying its rights prospectus.
The pilot line at Chartered's latest 300-mm wafer fabrication plant, Fab 7, will be installed for $350 million and will likely start production late in the third quarter of 2003. It has invested about $210 million in Fab 7 as of June 30, it said.
Chartered said it was keeping its third-quarter guidance of revenues being flat or up five percent sequentially, with average selling prices rising five percent from the previous quarter.
The company expects a third-quarter net loss of $87 million to $90 million and a loss per American Depositary Share (ADS) of 63 to 65 U.S. cents, unchanged from previous guidance. |
