Chartered (C27) Merrill Lynch Report

SINGAPORE (XFN-ASIA) - Merrill Lynch said it has raised its fair value
for
Chartered Semiconductor to 1.60 sgd from 1.19 sgd as it expects the
stock  
to provide better returns this year because of improving revenue and      
margins.                                                                  
                                                                            
      "We raise Chartered's 2006 return on invested capital forecast
from 5
pct to 8 pct on slightly higher margin assumptions, but still expect      
returns to average 10 pct in 2007," Merrill Lynch analyst Dan Heyler
said  
in a note.                                                                
                                                                            
      "Chartered's profitability should continue to steadily improve in    
2006. A well thought-out recovery strategy, which has been in place
for    
over two years, is likely to show important operational and financial      
milestones in 2006," Heyler said.                                          
                                                                            
      "We believe profitability is rising on its mature capacity, while
its
improved technology road map is attracting new customers that will        
generate economies of scale on 300 millimeter [platform]," he added.      
                                                                            
      While the market in general expects Chartered's revenues to
decline  
5-10 pct in the first quarter from the fourth quarter, Heyler said
such    
expectations may prove conservative.                                      
                                                                            
      "We believe 200 millimeter could show growth in the first
quarter,    
while 300 millimeter should be flat, given strong Xbox 360
microprocessor  
loading," Heyler said, adding that overall Chartered's revenue in the      
first quarter should be sequentially flat to down 5.0 pct.                
                                                                            
      For the whole of 2006, Merrill Lynch expects Chartered to post a
net  
profit of 153.90 mln usd, reversing the estimated net loss of 169 mln
usd  
for 2005. Net profit should grow further to 234.54 mln usd in 2007, it    
said.                                                                      
                                                                            
      At 11.11 am, Chartered was up 0.03 sgd or 1.02 pct at 2.98, with
3.40
mln shares traded.