MSInvestment conclusion: We continue to like MediaTek,the only company in our coverage with EPS growthexpected in 2009 yet trading at similar valuations topeers. Focus on China handsets is a big part of thegrowth story but also the main reason for lack of visibilityand high revenue volatility. We believe much of thenegative news flow and volatility is priced in the sharesand it is time to focus on growth potential. We raise ourprice target to NT$300 and remain Overweight.

What's new: MediaTek reported 4Q08 revenue ofNT$20.65 billion, down 26.4% Q/Q but slightly betterthan the preannounced range of 30-33% decline.Management guided for 1Q09 revenues to fall by 8-16%,at high end of expectations for a 15% drop but worsethan our Street-high expectation of down 5%. Webelieve the guidance is conservative.

Raising estimates slightly: We maintain our 2009revenue estimate but increase our EPS estimate by 9%.The increase in EPS is a result of lower opex as guidedby management.Where we differ: We are positive long term, as Chinahandset growth should continue, 3G adoption shouldpick up in 2010, and other new products could begin tocontribute in 2H09. In addition, our analysis of handsetsupply and demand shows that MediaTek is due to seea pickup as it catches up with subscriber growth.

China handset subscription monthly net adds: Monthlysubscriber sales have risen close to net adds (see Exhibit1). Historical correlation suggests that when sales fallbelow net adds, the stock should be bought, and in our view,we are right there.