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Post Info TOPIC: Global Testing Corporation
KK


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Global Testing Corporation
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Extracts fm UOBKayHian Report dated 20-Oct-05,

Mass production for Philips to start in 4Q05 

On track to meet 3Q guidance. Global Testing experienced higher testing volume from Sunplus (DVD), Realtek (LAN), ALi (set-top box and MP3) and Marvell (HDD controller) in 3Q05. This has lead to higher capacity utilisation of 90-95% in 3Q05 compared to 80-85% in 3Q05. The Company added 21 testers in 3Q05, bringing total to 130 testers. ASP increased 3% qoq due to strong demand for Agilent 93000 and Teradyne J750 test platforms. This will lead to better margins in 3Q05. ?We expect Global Testing to meet guidance of achieving sequential revenue growth of 25-30% in 3Q05.

Global Testing focuses on testing mixed-signal semiconductors for consumer and communications applications (very little exposure to PC industry). ?Strong demand for consumer products during the holiday season will provide sequential revenue growth of 5% in 4Q05. ?However, growth is constrained by lead-time of two months for delivery of new testers. The Company estimated capex of US$45-50m in FY05 and will increase capex by about 10% in FY06.

Secured Philips as new customer. Global Testing has completed test programme development for Philips and will commence mass production for testing of TV controller chips earlier in 4Q05 (previously expected in 1Q06). Philips could evolve into a major account and requires up to 8 testers. ?Philips plans to increase outsourcing at the semiconductor division from present 20% to 30-50%. ?Global Testing has commenced test programme development for Intel involving GPS and PDA applications. ?Mass production for Intel is expected in FY06. The Company has already started testing 12-inch wafers for Marvell and PMC Sierra and will do so for TSMC in Oct 05.

Global Testing has corrected in tandem with other semiconductor stocks in October (STATS ChipPAC: -13.5% and UTAC: -10%). This has brought valuation for Global Testing down to P/B of 0.95x (sector: 1.9x) and FY05 PE of 6.6x (sector: 13.7x). Our target price of S$0.40 represents FY05 EV/EBITDA of 5x (STATS ChipPAC: 7.6x, UTAC: 3.5x) and FY05 PE of 13x (UTAC: 16.3x).

Global Testing has tentatively scheduled to announce 3Q05 results on 27th Oct 05 (next Thursday) after market closes.



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tfwee


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Extracted From UOB Kay Hian
Global Testing

Benefitting from recovery at foundry customers TSMC and UMC
TSMC achieved record monthly sales in Sep 05. TSMC reported a strong 8.8% increase in monthly sales to NT25.2b in Sep 05 after a robust 11.2% mom increase in Aug 05. Similarly, UMC reported a 6.1% mom increase in sales to NT8.5b in Sep 05 after a sterling 13.4% increase in Aug 05. The latest set of monthly sales figures translates into sequential revenue growth of 18.4% for TSMC and 21.3% for UMC in 3Q05.

Global Testing will benefit from recovery at foundry customers with increased orders for high margin wafer sorting from TSMC and UMC. TSMC (largest customer) and UMC (third-largest customer) accounted for 21.6% and 14.6% of sales in F04 respectively. Global Testing guided sequential revenue growth of 25-30% in 3Q05 and expects capacity utilisation to increase from 80% in 2Q05 to 85-95% in 3Q05. It has expanded its customer base from 39 in FY04 to 50 in 1H05, with new customers expected to contribute more significantly in 2H05. Customers are guiding rapid increase in wafer volume for consumer and wired communications applications such as DVDs (Sunplus), set-top boxes (ALi), HDD controllers (Marvell) and LANs (Realtek).

Reiterate BUY. We like Global Testing for its focus on wafer sorting for mixedsignal semiconductors. It trades at a discount to regional peers in the back-end assembly & test space with FY05 PE at 8.4x (sector: 16x) and P/B at 1.2x (sector: 2.1x). Our target price of S$0.40 is undemanding and represents FY05 EV/EBITDA of 5x (STATS ChipPAC: 8.2x, UTAC: 4x) and FY05 PE of 13x (UTAC: 18.3x).

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KK


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The website for Global Testing



-- Edited by KK at 23:42, 2005-10-03

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