From DBSV this morning!!!!!!

Global Testing

Landed new smartphone order

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who attended the Pulse of Asia conference last week. Apart from the

recovery in the semicon market, the company could get an added

boost from new orders in the smartphone area.Story: Global Testing (GTC) gave a positive update to investors

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quarter of 2007, the mixed signal and logic chip tester should see

strong revenue ramp-up and improving profitability from Q3 amid an

upturn in the semicon industry and new engagement in smartphone

projects. We believe management would guide positively for the next

six months and the year?s earnings performance would be heavily

skewed towards a 10:90 split between 1H and 2H.Point: While we expect GTC to make only US$1.8m in the second

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and 1.1x P/B compared to sector average of 12x PER and 1.7x P/B. Our

one-year price target of S$0.42 is based on mid-cycle forward P/BV of

1.5x, supported by its historical trading band of 0.9-2x P/B.Relevance: GTC currently trades at around 10.9x FY08 earnings

Improvement starting from Q2.

problem in the last few months, GTC experienced m-o-m improvement in

orders starting from April to June. We estimate GTC could report Q2 net

profit of US$1.8m on sales of US$15m. Although still lower yoy, this

represents a six-fold jump in earnings over Q1 and revenue growth of 13%

sequentially. Including the S$0.2m recorded in the first quarter, GTC is

expected to post US$2m in the first half of 2007.Notwithstanding the lingering inventory

Positive surprise from new smartphone

management chip testing orders from Philips some weeks ago for a

smartphone that is all the rage now. Scheduled to ramp next week, GTC is

expected to start with seven testers now to 15 by end Q3 before picking up

further throughout the rest of 2007. GTC is one of two qualified suppliers

and both are overwhelmed with bookings. The company is also busy

ramping WiFi chips for Marvell, which in turn supplies to smartphone

ultimately. On balance, management believes smartphone-related orders

could account for 5-10% of its revenue by year end.. GTC started landing power

Capacity utilisation trending higher

an uptick in the PC-related market with rising graphic chip orders from

both AMD and nVidia. The consumer electronics sector is also heating

up with signs of improvement from MorningStar(DVD controllers) and

Sunplus (LCD TV controller). Consequently, we expect capacity

utilisation to hit 80% from only 55-60% in the March quarter. We

believe a stronger than expected ramp-up in smartphone IC testing

could lead to potentially higher utilisation rate and operating margins.. Elsewhere, management is seeing