Unisem 9M results below CIMB Research forecast

CIMB Research still expects Unisem to record stronger earnings delivery in 2H18F, driven by its 8-inch wafer capacity expansion in Ipoh,

KUALA LUMPUR: Semiconductor company Unisem’s 9M18 results were below expectation at 67% of CIMB Equities Research’s FY18 forecast due to weaker-than-expected sales in 3Q18, but in line with consensus at 73%.

The research house said on Friday it cut its FY18-20F EPS by 5%-8% to account for lower sales projections.

“Maintain Add with a lower RM3.30 TP. Depreciation in ringgit against US$ and entry of new strategic shareholders are potential catalysts for the stock,” it said.

In 3Q18, Unisem’s revenue grew 3% on-quarter in 3Q18 to RM355mil from RM343mil in 2Q18, mainly driven by favourable forex movement. 

In US$ term, 3Q18 revenue was flat on-quarter, with growth at the lower end of the group’s guidance of 0%-5%. 

The group attributed the flattish revenue delivery partly to sluggish demand in the smartphone market and wafer supply issues among its customers. 

Overall, core net profit rose 13% on-quarter to RM35.1mil in 3Q18. 

Unisem’s 9M18 revenue fell 8% on-year to RM1.02bil, mainly due to appreciation in ringgit against US$ (+8% on-year in 9M18). In US$ term, sales were relatively flat on-year at US$255.3mil (vs. US$255.1mil in 9M17). 

“The group was negatively impacted by the strengthening of the ringgit against the US$. EBITDA margin contracted 4.2% pts on-year in 9M18 to 20.1% due to unfavourable forex and changes in sales mix. Overall, 9M18 net profit fell 43% on-year from RM127.4mil to RM72.3mil,” it said.

“We see the potential entry of new shareholders as positive for Unisem as it could assist the group to penetrate the Chinese market and provide better economies of scale in its wafer-level packaging business,”  it said. 

To recap, Unisem received a pre-conditional voluntary take-over offer of RM3.30 a share in September 2018, a joint offer from China-based TSHT, TH Group and existing major shareholders.