Japan brokerage maintains ‘buy’ for MediaTek on 5G optimism

Taipei-A Japanese brokerage has given a "buy" recommendation on shares of Taiwan-based integrated circuit (IC) designer MediaTek Inc., citing optimism toward the IC company's efforts in 5G technology development.

In a research note, the Japanese securities house said Tuesday that MediaTek's 5G technology development is expected to diversify the company's product portfolio and that an increase in 5G chip shipments is expected to boost its bottom line.

The brokerage said the 5G chips are expected to push upward MediaTek's average selling price.

MediaTek remains one of the top tech stock picks of the Japanese brokerage in Asia in the second half of this year, according to the research note.

While the Japanese brokerage did not give a target price for MediaTek shares, the "buy" rating prompted investors here to chase the stock throughout the Tuesday trading session, when the stock gained 1.55 percent to close at NT$393.00 (US$12.88) on the Taiwan Stock Exchange.

The stock served as one of the drivers of gains in the electronics sector, as well as on the main board, where the benchmark weighted index ended up 0.17 percent at 11,333.87 points.

Amid market optimism toward its 5G technology, MediaTek shares have gained almost 25 percent since the beginning of August.

In September, MediaTek said it has invested more than NT$100 billion in 5G chip-related research and development. The firm is one of the global 5G chip development pioneers and has sent samples to clients who are expected to use the firm's chips in products that are scheduled to hit the market in the first quarter of next year.

Earlier this month, a European brokerage issued a similar upbeat report on MediaTek's 5G chip contribution, saying that shipments are expected to hit 30 million units in 2020, rising to 75 million in 2021.

The Japanese brokerage's research note was published just a day ahead of an investor conference scheduled by MediaTek to detail its third-quarter earnings and give its fourth-quarter guidance.

The securities house said MediaTek is expected to report NT$5.08 in earnings per share (EPS) for the third quarter, an improvement from NT$4.11 in the second quarter, on the back of the peak season effect, as well as its efforts to rein in operating costs.

As for the fourth quarter, the brokerage said, MediaTek could feel the pinch resulting from the slow-season effect, but is expected to benefit from its efforts to boost its share of the global smartphone chip market on a move by some clients to shift their orders to the company from U.S. rival Qualcomm Inc.

MediaTek is expected to post NT$5.18 in EPS for the fourth quarter. (Bu Jeffrey Wu and Frances Huang)

Source: Focus Taiwan News Channel