CIMB Research still expects Unisem to record stronger earnings delivery in 2H18F, driven by its 8-inch wafer capacity expansion in Ipoh,
KUALA LUMPUR: Unisem’s FY17 net profit came in at 6% below CIMB Equities Research’s forecast and was 7% below Bloomberg consensus expectations due to wider-than-expected forex losses and lower average selling prices (ASP) from older packages.
It said on Friday the chipmaker’s net profit fell 1.7% on-year in FY17 mainly due to negative impact from forex losses.
“Unisem plans to raise its FY18F capex to nearly RM200mil as part of the group’s strategy to invest in advanced processes and capacity expansion for future growth.
“We tweak FY18-19F EPS by 3%-5% to reflect narrowing margin from older packages. Maintain Add with a lower RM3.60 target price, still based on 13.5 times CY19F price-to-earnings (P/E),” it said.
CIMB Research pointed out Unisem’s revenue fell 6.5% on-quarter in 4Q17 partly due to appreciation in ringgit against US$ and lower ASPs from older packages and higher mix of lower-margin packages.
As a result of higher operating leverage, core net profit dropped 20.8% from RM40.4mil in 3Q17 to RM32mil in 4Q17.
Its US$ revenue in FY17 grew 7% on-year to US$341mil due to higher sales across all product portfolios.
The stronger sales performance was broadly in line with the global semiconductor industry's ex-memory demand growth in 2017.
“In spite of higher revenue, the group’s earnings before interest, tax, depreciation and amortization (Ebitda) fell 3.1% due to higher operating expenditure as a result of increased raw material prices and negative forex impact.
“If we strip out the forex impact, Unisem’s net profit would have expanded 14.4% on-year to RM170mil in FY17 from RM148mil in FY16,” it said.
CIMB Research said Unisem’s communication segment revenue (made up 25% of group revenue in FY17) fell 12.1% on-year, partly due to sluggish smartphone demand and intense competition in the segment.
However, this was offset by stronger revenue growth in the industrial (+45%) and consumer segments (+14%) in FY17. Automotive sales grew marginally by 0.6% in FY17.
“Unisem is investing about RM120mil for new 8-inch and 12-inch wafer bumping lines in Ipoh over FY18-19F. The investment will increase its wafer bumping capacity in Ipoh from 25,000 a month to 35,000 a month,” it said.
The expansion will be completed in phases. The first phase involving 7,000 8-inch wafers a month is slated to come on stream by 2H18F. The second phase involves the new 12-inch bumping line with 3,000 wafers a month. This will only come on stream in 2019F due to the longer qualification period.
“We cut our FY18-19F EPS by 3-5% to account for the narrowing margins of its legacy packages and on-going losses in Batam plant.
“Unisem expects 0%-5% decline in US$ revenue in 1Q18 due to seasonal demand weakness. However, we expect a significant drop in its profitability in 1Q18F due to wider forex loses in the wake of the ringgit's appreciation versus the US$.
“Nevertheless, we still expect Unisem to record stronger earnings delivery in 2H18F, driven by its 8-inch wafer capacity expansion in Ipoh,” it said.
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