• Unisem announced that it has received a pre-conditional voluntary conditional general offer of RM3.30/share in cash, representing a total outlay RM1.82bil based on 550.56mil offer shares. The joint offerors comprise of Unisem’s group chairman and managing director John Chia Sin Tet and Chinese firm Tianshui Huatian Technology Co Ltd (TSHT).

• As part of TSHT’s expansion plan, collaborating with Unisem is seen as a strategic alliance to create synergistic benefits with its existing business. Unisem’s strong cliental network in the North America and European region (c. 45% and 15% of FY17 revenue) will allow TSHT to further strengthen its global presence.

• At the same time, TSHT, being a significant outsourced semiconductor assembly and test (OSAT) player in China will enable Unisem to expand rapidly its operations in Chengdu, China.

• TSHT is listed on the Shenzhen stock exchange with a market capitalisation of 10.38bil Yuan or RM6.27bil. According to a report in Apr 2018 by SEMI, a global industry association in the semiconductor space, TSHT is ranked as the second largest packaging company in China after Jiangsu Changjiang Electronics Technology (JCET), followed by Nanton Fujitsu Microelectornics (TFME).

• The offer will be subject to these pre-conditions: i) approval by the shareholders of TSHT at an EGM to be convened and ii) any other appropriate authorisation from relevant authorities that may be identified by the offeror. The cutoff date (long-stop date) for the pre-conditions to be met is 11 Mar 2019.

• TSHT via its subsidiaries, Huatian Electornics Group (HK) Ltd (HT Hong Kong) and Huatian Technology (Malaysia) Sdn Bhd (HT Malaysia) will take on 20.76% and 79.24% of the 550.56mil offer shares respectively, representing 75.72% of Unisem. The remaining 24.28% is currently held by John Chia, through his son Alexander Chia and his private vehicles, Jayvest Holdings Sdn Bhd and SCQ Industries Sdn Bhd

• In order to maintain Unisem’s listing status in the Main Market, HT Hong Kong will first sell its to-be-acquired Unisem shares, followed by HT Malaysia, to the extend required to comply with the public spread requirement of at least 25% of total listed shares to be held by public shareholders.

• We recommend shareholders to accept the offer price of RM3.30/share, which represents a 11.86% premium to the 5-day VWAP of RM2.95 and a 32% premium from our target price of RM2.50. Our FV is pegged to FY19F PE of 14x.

Source: AmInvest Research - 13 Sept 2018