Announced bonus issue of 807m new shares on the basis of 1-for-1 to reward shareholders, improve marketability and liquidity. 1H21 core PAT of RM101m (+>100% YoY) was in line. Approved an interim tax-exempt DPS of 2.0. The stellar performance was mainly driven by favourable revenue mix, higher volume loading and ASP. 3Q21 revenue outlook is guided to be +5-8% QoQ as order visibility remains robust despite the 2-week Ipoh plant closure. Reiterate BUY with unchanged TP of RM9.88, pegged to 33x of FY22 EPS.

Bonus issue of 807m new shares on the basis of 1-for-1 to reward shareholders, improve marketability and liquidity. While entitlement date will be determined and announced later, this is subject to approvals from Bursa and shareholders via EGM.

Within expectations. 2Q21 core PAT of RM57m (+27% QoQ, +69% YoY) brought 1H21’s total to RM101m (+>100%) matched our and street full year estimates at 52% and 47%, respectively. 1H21 one-off items include inventories write-down (-RM403k), forex loss (-RM1.8m) and grant income received (RM817k).

Dividend. Approved an interim tax-exempt DPS of 2.0 sen (2Q20: 2.0 sen) going ex on 16 Aug. YTD DPS amounted to 2.0 sen vs 1H20’s 2.0 sen. Traditionally, Unisem divvies 3 times every FY.

QoQ. Assisted by favourable forex (2Q21: RM4.13/USD vs 1Q21: RM4.06/USD), top line gained 8% on the back of higher sales volume achieved. In USD term, sales expanded by 6% to USD97m. In turn, core earnings jumped by 27% to RM57m due to (1) favourable revenue mix (higher contribution from high-margin WL/MEMS bump products); and (2) lower effective tax rate of 12% vs 1Q21’s 13%.

YoY. While forex was less favourable (2Q20: RM4.32/USD), top line gained 30% (+36% in USD term) mainly driven by higher sales volume and ASP. Although D&A was higher 19%, bottom line leaped 69% attributable to lower interest expense and effective corporate tax rate (2Q20: 18%).

YTD. For the same explanation above, top and bottom lines advanced by 33% and >100% to RM776m and RM101m, respectively.

Outlook. 3Q21 revenue is guided to be +5% to +8% QoQ (in USD term) with good order visibilities across all market segments. This positive estimate is done after taking into the considerations of (1) clients’ forecasts and past loadings; (2) wafer, substrate and leadframe shortages; and (3) 2-weeks Ipoh plant closure.

Forecast. Unchanged.

Reiterate BUY with unchanged TP of RM9.88, pegged to 33x of FY22 EPS. Despite trade war and Covid-19 risks, Unisem’s prospect has improved with (1) closure of loss-making Batam plant; (2) favourable forex; (3) gradual synergistic relationship with TSHT; and (4) healthy balance sheet.

Source: Hong Leong Investment Bank Research - 2 Aug 2021