Stock Name: UNISEM
Company Name: UNISEM (M) BHD
Research House: INTER PACIFIC

Unisem (M) Bhd
(Aug 2, RM2.24)
Reiterate outperform at RM2.29 with a target price of RM2.77: We reiterate outperform with our target price pegged at RM2.77 based on 1.8 times P/BV. We believe Unisem will continue to benefit from the current positive momentum exhibited by the uptrend in global semiconductor sales and strong book-to-bill ratio of 1.19 times in June.

Unisem's 1HFY2010 revenue of a'' RM688.8 million, or up 58% year-on-year (y-o-y), is in line with our expectation, accounting for 50% of our FY2010 forecast.

In tandem with strong revenue growth and better profit before tax (PBT) margin of 14.4%, Unisem's 1HFY2010 PBT garnered a surplus of RM89.7 million after incurring a loss of RM3.7 million in 1HFY2009.

The 2QFY2010 revenue growth of 9.2% quarter-on-quarter (q-o-q) was above the management's guidance of 5% to 8%.

The above expectation was due to 10% q-o-q growth in Asia and 5.3% q-o-q growth in the US. However, the upside growth was negated by the euro crisis.

Uncertainty in the euro due to the debt crisis hurt Unisem's earnings from this segment which was down by 19.7% q-o-q.

Unisem's 1HFY2010 operating profit margin of 15.5% exceeded our expectation by 1.3 percentage points.

The higher margin was due to better sales volume and average selling price that continued to remain strong owing to low capacity shortage. ' Inter-Pacific Research, Aug 2


This article appeared in The Edge Financial Daily, August 3, 2010.