Unisem Q1FY19 core net profit misses CIMB Research forecast

KUALA LUMPUR: Unisem’s Q1 FY19 core net profit missed CIMB Equities Research/consensus expectations at 5% of FY19F forecast due to lower-than-expected utilisation and changes in the sales mix. 

The research house said on Friday Unisem expects 5%-10% quarter-on-quarter sales growth in 2Q19, driven by a pick-up in radio frequency chips demand for 5G network infrastructure and Chinese mobile players. 

“We cut FY19-21F EPS by 9%-15%. Maintain Reduce. Delay in 5G network expansion and prolonged demand weakness are potential de-rating catalysts,” it said.

CIMB Research said Unisem’s revenue in Q1FY19 fell 5.7% on-year to RM303mil due to lower utilisation across all divisions – leaded, leadless, wafer-level chip-scale package (WLCSP) and testing. In US$ terms, revenue fell by a wider 9.6% to reach US$74mil. 

Meanwhile, depreciation rose 2.5% on-year following new wafer bumping capacity expansion. 

Overall, Q1 FY19 net profit fell marginally by 0.1% on-year to RM6.1mil. US$ revenue in Q1 FY19 fell 6.8% on-quarter, within the group’s guidance of a 5%-10% on-quarter decline. 

“Management attributed the lower sales to prolonged demand weakness in power management chip packages used in consumer applications and excess inventory for automotive customers. 

“This was due to new regulations that made some inventory obsolete or non-compliant with the new fuel economy and emissions standards from September 2018. Overall, Q1 FY19 net profit plunged 74% on-quarter. 

“Unisem is guiding for 5-10% sequential US$ revenue growth in 2Q19, driven by an expected pick-up in radio frequency component demand for 5G network base station infrastructure and Chinese smartphone players. 

“Unisem spent higher capex of RM71.9m in Q1 FY19 (vs. RM45.2m in 1Q18) to buy flip-chip bonders, bumping and wafer level equipment and test probers to complete the expansion of the new wafer bumping facility and production capacity for its microphone assembly project,” it said.

CIMB Research said Unisem was reducing its contract workers headcount at the Batam plant due to a low utilisation rate given the sluggish demand in the automotive market. 

The group is also exploring cost-saving initiatives from a potential discount on raw material procurement through its new single-largest shareholder, Tianshui Huatian Technology Group. 

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