PETALING JAYA: Unisem (M) Bhd
’s proposed private placement is expected to ease funding constraints for its expansion plans and strengthen its balance sheet, although its current share price already reflects much of the positive outlook, according to BIMB Research.
It said that the semiconductor packaging and testing group’s fundraising exercise would support future capacity growth and improve financial flexibility, and maintained its “sell” recommendation on valuation concerns despite lifting its target price to RM2.55 from RM2.37.
It added: “While the worst of Unisem’s operational drag is likely behind it, the stock’s valuation remains expensive.
“Risk-reward is tilted to the downside given that positive news is already reflected in the price, leaving limited room for re-rating.”
Unisem recently proposed a private placement of up to 161.3 million new shares, representing up to 10% of its issued share capital, at an indicative issue price of RM4.60 per share.
The exercise could raise gross proceeds of up to RM742mil, with the first tranche expected to generate RM467.5mil.
The proceeds will primarily fund manufacturing expansion, including the purchase of about 2,400 assembly and test equipment units, a wafer bumping system, new clean-room facilities and the repayment of bank borrowings, according to the research house.
BIMB Research noted that nearly 60% of the proceeds, or RM444.5mil, has been earmarked for equipment purchases and clean-room facilities, while RM269.9mil, equivalent to 36.4% of the total, will be used to reduce debt.
Furthermore, the remainder will be allocated to working capital and placement expenses.
