Results

Continue to bleed with 2Q13 recorded third consecutive quarterly loss since 4Q12, albeit the quantum is shrinking thanks to fruitful cost management and business model realignment initiatives.

Cumulatively, 1H13 results registered a core net loss of RM15.1m disappointing HLIB and consensus’ full year profit forecasts of RM8.4m and RM13.8m respectively.

Deviations

Revenue came in weaker than expected although worldwide semiconductor sales in 2Q13 (April and May) is indicatively stronger compared to 1Q13.

Dividends

None.

Highlights

2Q13 top line, the weakest since 1Q09, contracted 12.7% yoy as decline recorded in Asia and Europe segments with -14.5% and -14.0% respectively, muting the 173.7% improvement in USA segment. This was attributable to the compounded effect of lower sales volume as well as ASP arising from changes in product mix.

1H13 EBITDA strengthened to RM80.0m (+12.9% yoy) with margin of 16.1% (+3-ppt yoy) attributed to rationalization of low margin / unprofitable products. However, there was one-off retrenchment cost recognized in 1Q12 which amounted to RM5.7m. If adjusted, EBITDA would have grown by only 4.4% yoy while EBITDA margin expanded by 1.9-ppt yoy.

Overall utilization rate was between 60% and 65% despite WLCSP / flip-ship product lines were running at more than 80% of capacity.

FY13 CAPEX is revised to ~RM40m.

Unisem guided that 3Q13 will remain challenging with possible sequential reduction in sales (2%-3% qoq) as there is a lack of killer application or stalemate in electronics innovation.

Catalysts

• Improved consumer confident.
• Technological advancement and creation of new electronics applications.

Risks

Contagion effect of European debt crisis, FOREX, weak consumer demand.

Forecasts

Updated model by correcting the deviation mentioned above and based on the latest guidance. In turn, FY13-15 EPS were slashed by 333.3%, 91.4% and 53.7% respectively.

Rating

Hold, TP: RM0.91

Positives – Appreciation of greenback, proliferations of smartphones, tablets, wearable techs and hybrid / electric automobiles.

Negatives – intense competition from Taiwanese peers, higher input costs, challenging economic outlook which will eventually hampers consumer confident and stalemate in electronics innovation.

Valuation

We maintain our HOLD rating on the equity but cut our TP by 4.2% to RM0.91 from RM0.95 after rolling over our valuation based on unchanged P/B of 0.62x (1SD below historical mean) FY14 book per share.

Source: Hong Leong Investment Bank Research - 25 Jul 2013