• Values re-emerge after recent carnage. At RM1.75, Unisem offers strong growth prospects (FY14-17 CAGR of 27.8%) at undemanding valuations of 10.4x FY16 P/E (16% below peers’ P/E of 12.4x) and 1.06x P/B (70% discounts against peers P/B of 3.58x) , supported by decent dividend yield of 4.4%-5.3% for FY15-16. Meanwhile, Unisem had announced a 3 sen interim dividend (exdate: 9 Sep) to be paid on 29 Sep. We believe such valuations have provided a sufficient margin of safety and cushion further sharp share price decline, supported by grossly oversold daily indicators .
• Deeply oversold. From YTD high of RM2.65 on 21 Apr, Unisem’s s hare price tumbled 40.8% to a low of RM1.57 (12 & 18 Aug) before closing at RM1.75 yesterday, in tandem with the broader market carnage amid external and internal concerns.
• Technically, its deeply oversold weekly slow stochastic oscillator and “Tweezers Bottom” formation suggest potential reversal of downtrend. Following the refill of RM1.73-1.79 gap yesterday, Unisem prices are likely to appreciate further towards immediate resistance at RM1.83 (23.6% FR).

• A decisive breakout above RM1.83 bodes well for the stock to advance higher towards RM1.93 (20 Aug high) and our long term objective of RM2.13 (200-d SMA) resistance targets.
• Lower supports are situated at RM1.65 (25 Aug low) and RM1.57. Cut loss at RM1.55.

Source: Hong Leong Investment Bank Research - 27 Aug 2015