MediaTek shares rally on back of September sales growth

With MediaTek benefiting from strong demand in China for smartphone chips, many investors are optimistic that the company will upgrade its 2012 forecast for smartphone chip shipments, dealers said.

As of 11:12 a.m., shares of MediaTek had climbed 2.83 percent to NT$327.50 (US$11.22), with 10.88 million shares changing hands. The benchmark weighted index was up 0.21 percent at 7,698.12 points.

“The strong showing in September sales helped MediaTek beat its sales guidance for the third quarter of this year, prompting many investors to buy the stock,” MasterLink Securities analyst Tom Tang said.

Before the local market opened, MediaTek announced September sales of NT$11.01 billion, an increase of 19.43 percent from August, driven by solid demand in China for smartphone chips.

In the third quarter, MediaTek's sales totaled NT$29.47 billion, beating its estimate of NT$26.5 billion to NT$27.7 billion.

Tang said MediaTek's smartphone chip shipments to China for the July September period hit 39 million units, up from 21 million units in the second quarter.

With strong demand in China expected to continue into the fourth quarter, the company's smartphone shipments for the October-December period are likely to rise to 58 million, he said.

“The market has high hopes that MediaTek will raise its smartphone chip shipment target for 2012 to more than 120 million units from the current estimate of 95 million units,” Tang said.

“I think foreign institutional investors are picking up the stock as they are optimistic about MediaTek's bottom line,” he said.

Foreign institutional investors bought a net 595,028 MediaTek shares Thursday, boosting their stake in the company to 41.18 percent from 41.12 percent the previous day, according to the Taiwan Stock Exchange.

Tang said his brokerage has raised its forecast for MediaTek's earnings per share for the third quarter from about NT$3.0 to NT$4.2, based on the company's higher-than expected third quarter sales.

“China will remain MediaTek's major market and the company's EPS for the fourth quarter is expected to rise to NT$5,” Tang forecast.

MediaTek has become the largest smartphone chip supplier to China, taking more than a 50 percent share of the market, according to Tang.

“Due to optimism about its earnings, MediaTek shares may continue their uptrend before encountering some technical resistance at around of NT$345 to NT$350,” Tang said.

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