KUALA LUMPUR: Kenanga Research said it takes a cautious view over Unisem (M) Bhd
's path to recovery following the company's announcement yesterday that 1QFY23 net profit had slumped over 80% year-on-year (y-o-y) on the back of contracting sales.
The semiconductor assembly and testing firm filed its quarterly earnings result with Bursa Malaysia at the lunch break yesterday, which triggered selling of its shares by investors in the afternoon session.
"Its 1QFY23 core net profit of RM9.9mil (80.6% lower y-o-y) came in way below expectations, accounting for only 4% of both our full-year forecast and the full-year consensus estimate," said Kenanga in a results review.
At the closing bell, Unisem's trading stock ended at RM2.92 a share, eight sen or 2.6% below its reference price.
Unisem's management had guided for a 10-12% sequential improvement in revenue in the coming quarter as it forecast improving orders from customers and die support for its wafer bumping facility in Ipoh, which had dragged on earnings.
However, Kenanga expects more headwinds ahead as new capacity coming online in the second half of the year is expected to increase operating costs, creating an "uphill battle" scenario for the group.
It noted also the "looming uncertainty" in the immediate term, which has resulted in cautious order replenishment among customers.
The research firm said it revised its FY23-24 earnings projection lower by 42% and 19% respectively.
"Maintain 'market perform' but with a lower target price of RM2.75 (previously RM3.10) on a rolled-forward FY24F, pegged to an unchanged price-earnings ratio of 20x, which is in line with peers’ forward mean," it said.
On its investment thesis for Unisem, Kenanga said it likes the stock for its healthy exposure in the power module business and for being able to command pricing and retain customer stickiness given its quality packaging services.
It said the company also has a strong balance sheet to support its expansion plans.
