FY21 core PAT of RM200m (+35% YoY) was in line with HLIB and consensus estimate s. Approved a third interim tax-exempt DPS of 2.0. Sequential improvement was attributable to the resumption of Ipoh plant following plant closure in 3Q21 in view of EMCO implementation. Visibility and outlook for 1Q22 remains good. Expect sequentially flattish 1Q22 revenue in terms of USD despite fewer work days and CNY holidays. Demand continues to be strong across all market segments from power management, RF, automotive and consumer electronics. Reiterate BUY with lower TP of RM4.74.

Matched expectations. 4Q21 core PAT of RM58m (+46% QoQ, -12% YoY) brought FY21’s total to RM200m (+35% YoY), matching our and consensus expectations, accounting for 102% and 97% of full-year forecasts, respectively. FY21 one-off items include inventories write-down (-RM669k), forex loss (-RM4m) and grant income received (RM2.7m).

Dividend. Approved a third interim tax-exempt DPS of 2.0 sen (4Q20: 2.0 sen) going ex on 24 Mar. YTD DPS amounted to 6.0 sen vs FY20’s 6.0 sen.

QoQ. While forex was relatively stable (4Q21: RM4.18/USD vs 3Q21: RM4.19/USD), top line gained 16% as Ipoh plant has resumed normal production activities following plant closures in 3Q21due to the implementation of EMCO and the order of MoH. In USD term, sales expanded by 17% to USD102m. In turn, core earnings grew 46% to RM58m due to lower effective tax rate of 3% vs 3Q21’s 16%.

YoY. Partly aided by favourable forex (4Q20: RM4.11/USD), top line gained 16% (+14% in USD term) driven by higher sales volume and ASP. However, bottom line shrunk by 12% attributable to (i) lower EBITDA margin of -2.6ppt; and (ii) higher D&A (+10%).

YTD. Turnover grew 20% to RM1.6bn mainly due to higher sales volume. Despite the higher D&A (+14%), bottom line leaped 35% to RM200m thanks to (i) favourable revenue mix (higher contribution from high-margin WL/MEMS bump products); (ii) lower net finance cost; and (iii) lower effective tax rate of 11% vs FY20’s 13%.

Outlook. Visibility and outlook for 1Q22 remains good. Expect sequentially flattish 1Q22 revenue in terms of USD despite fewer work days and CNY holidays. Demand continues to be strong across all market segments from power management, RF, automotive and consumer electronics.

Forecast. Updated model based on FY21 full year figures and led to FY22-23 earnings revisions of -4% and -7%, respectively.

Reiterate BUY with lower TP of RM4.74 (previously RM4.94), pegged to unchanged 33x of FY22 EPS, reflecting the earnings adjustments. 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 - 28 Feb 2022