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Barclays recommends `buy' for MediaTek shares

2012/08/18 20:23:59

Taipei, Aug. 18 (CNA) Barclays Plc, a U.K.-based bank, has expressed optimism toward the earnings outlook of Taiwan-based integrated circuit designer MediaTek Inc., reiterating an "overweight" rating on the stock.

In a research note, the bank said the upbeat mood toward MediaTek's bottom line reflects solid demand for smartphone chips and the benefits of a merger with its small local rival, MStar Semiconductor Inc.

Barclays said it has left unchanged a target price of NT$340 (US$11.33) for MediaTek shares.

MediaTek closed up 0.86 percent at NT$294.50 on the Taiwan Stock Exchange Friday, when the benchmark weighted index ended down 0.29 percent, at 7,467.92 points.

According to MediaTek, the merger with MStar is expected to be completed Jan. 1 next year. It will be the next stage of an acquisition move following MediaTek's acquisition of a 48 percent stake in its smaller rival Aug. 13.

After the merger, MediaTek will continue to exist but MStar will be dissolved.

The IC designer said that starting from the third quarter, it will book part of MStar's earnings into its financial statement and will own all of the acquired company's profit from next January.

Meanwhile, Barclays said shipments of high-end smartphone chips are expected to increase significantly from the third quarter to boost the IC designer's sales.

In early August, MediaTek raised its target for smartphone chip shipments to 95 million units from an earlier estimate of 75 million units.

The U.K. bank said it has raised its forecasts of MediaTek's earnings per share for 2013 and 2014 by 1 percent and 2 percent, respectively, to NT$15.13 and NT$19.49.

It has also upgraded its estimates of the IC designer's operating margin for 2013 and 2014, to 16 percent and 18 percent, respectively, from 15 percent and 17 percent.

(By Lo Hsiu-wen and Frances Huang)