Semiconductor assembler Unisem (M) Bhd is flying high after chalking up an impressive nine-month FY2020 earnings of RM81.87 mil (9MFY2019: RM16.74 mil), thanks to improved efficiency and favourable product mix.
Despite the on-going US-China trade dispute and COVID-19 risks, Hong Leong Investment Bank (HLIB) Research expects improved prospects following (i) closure of its loss-making Batam plant in Indonesia, (ii) favourable forex, (iii) gradual synergistic relationship with the company’s major shareholder Tianshui Huatian Technology Co Ltd and (iv) healthy balance sheet.
“(Moreover, the) management is committed to solve the public shareholding spread issue which may lead to potential share price overhang before the Dec 31 dateline,” noted the research house.
All-in, HLIB Research has upgraded Unisem to “buy” on the back of higher target price of RM5.21 (from RM4.17 previously) after raising the company’s price-to-earnings multiple from 20 times to 25 times by pegging to its mid-FY2022 earnings per share.
Kenanga Research also expects the strong momentum to continue for Unisem as the company enters its 4QFY2020 with a healthy order pipeline.
“Its Chengdu plant is operating at 100% utilisation rate while the Ipoh plant is currently running above the 80% mark,” noted the research house.
With per-orders of the recently launched US 5G smartphone recording a 2.5 times increase from its predecessor model, Kenanga Research said Unisem is receiving more orders for multichip module power amplifier, particularly for the sub-6 RF segment.
“Also, the group’s tone towards the automotive segment has turned positive as demand for its TPMS (tyre pressure monitoring system) is seeing a strong recovery, mainly from China as it recorded five months of consecutive growth in car sales to plot a strong V-shaped rebound,” observed the research house.
Kenanga Research also upgraded Unisem to “outperform” with a higher target price of RM5.15 (from RM3.00 previously) to reflect improving prospects and “better margins as the group is starting over with a positive trajectory following the closure of the loss-making Batam plant”.
At 3.15pm, Unisem was up 38 sen or 8.64% to RM4.78 with 4.19 million shares traded, thus giving the company a market capitalisation of RM3.51 mil – Oct 26, 2020
