RHB raises earnings forecast for Unisem on higher sales and margins

KUALA LUMPUR: RHB Research is projecting higher sales and margin assumptions for Unisem (M) Bhd following its robust results and strong order visibility.

The research house, which reiterated its "buy" call on the stock, raised its FY20-22 forecast earnings 39% to 48%, and increased its target price to RM5.50.

"Trading at only 20x FY21F P/E, we believe the huge discount to the other OSATs players (>30x P/E) is bound to narrow on renewed optimism in earnings visibility and growth outlook as well as continued strong results in the coming quarters," it said.

However, it added that the short-term share price may be capped by the overhand from a potential share placement as management works to comply with the public shareholding spread requirement in the next few months.

Unisem's 9M20 core earnings of RM89.3mil were 62.3% higher year-on-year and beat RHB's and consensus estimate at 91.6% and 92.1% of full-year estimate.

RHB expects solid earnings visibility from sustained robust orders from smartphones, communications, and industrial and data centre-related products on top of recovery signs from the automotive segment.

Besides new projects on multi-chip modules, radio frequency (RF) switch and power devices for 5G smartphones and tablets are expected to drive growth prospects, it said.

In addition, Unisem is accelerating the Phase 3 expansion of its Chengdu plant to be ready by end-FY22 to cater for sustained strong demand in China.
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RHB Research , Unisem


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