Unisem projects higher utilisation in 4Q21F

The firm’s share price went ex-bonus last Wednesday following the issuance of bonus shares to reward its existing shareholders

by ANIS HAZIM / Pic credit: unisemgroup.com

CGS CIMB Securities Sdn Bhd positive on Unisem (M) Bhd’s corporate exercise of issuing 806.5 million bonus shares, increasing the group’s share base to 1.61 billion shares.

Analyst Mohd Shanaz Noor Azam said it will help to boost the stock’s liquidity and improve near-term trading sentiment.

Unisem’s share price went exbonus last Wednesday following the issuance of bonus shares that was mainly undertaken to reward its existing shareholders.

“Although the bonus issue does not alter Unisem’s fundamentals, we are positive on the corporate exercise as we believe it will help to boost the stock’s liquidity and improve near-term trading sentiment,” Mohd Shanaz said in a research note.

The analyst noted that Unisem Chengdu Co Ltd was not affected by power shortages in China, given its location in Sichuan which was not subjected to disruptions.

“We see this as a positive development for the group given that its Malaysian operations have been hit by temporary shutdowns in August and September due to a spike in positive Covid-19 cases.

“Nevertheless, we believe stronger contributions from Unisem Chengdu could partially offset the near-term impact at Unisem in Ipoh. We estimate revenue contribution from Unisem Chengdu to overtake Unisem Ipoh and account for 55%-60% of the group’s financial year of 2021 (FY21F) revenue,” stated Mohd Shanaz.

The analyst also expects higher utilisation in Unisem’s fourth quarter of 2021 (4Q21F) despite forecasting lower sales for its quarter-on-quarter in 3Q.

“We still think that Unisem will be able to catch up with production in 4Q21F in line with higher vaccination rates among its employees and greater worker availability as more employees return from mandatory quarantine leave. Overall, we believe this should translate into higher utilisation in 4Q21F,” he added.

Meanwhile, CGS-CIMB has reiterated an ‘Add’ call for Unisem with a target price of RM5.25.

“Our ex-bonus target price is still based on 30 times calendar year of 2022 price-to-earnings, with two standard deviations above the sector mean in view of the global semiconductor supercycle,” he said.

The potential rerating catalysts include a major capacity expansion drive in China to capture growing exposure to Chinese semiconductor customers, higher dividend payouts and recovery in wafer-level chipscale package volume loadings.

Separately, Unisem announced in a filing to Bursa Malaysia that its bonus issue has been completed following the listing and quotation of 806.5 million bonus shares on the Main Market as of Oct 8.