Posting an FY12 core loss of RM9.5m. Unisem's FY12 core loss of RM9.5m was within our expectation but missed consensus forecast by about RM4m. At the headline level, the company  registered  a  wider  loss  of  RM32.3m  mainly  due  to  one-time  expenses  arising from  the  consolidation  of  Departments 1  &  2  in at  its  Ipoh plant. We  understand  that  this was necessary to free up space for future wafer level chip scale packaging (WLCSP) and Modules work, both of which are high-margin products. Unisem declared a final dividend of MYR0.02/share despite dipping into the red last year.

Unisem  2.0  on  a  roll. Although the 4QFY12 numbers  declined q-o-q due to seasonality, we  see  improvement  on  a  y-o-y  basis.  Though  revenue  has  declined  marginally  y-o-y  in the  past  two  quarters,  EBITDA  has  spiked  up  and  boosted  profit  margins.  During  its analyst  briefing  yesterday,  management  reiterated  that  its  business  model  going  forward will  continue to  focus  on: i)  guaranteed  (take or pay)  business  agreement,  ii)  high-margin products such as WLCSP, and iii) cost optimisation.

Weak  showing  in  1QFY13.  Management  has  guided  for  its  1QFY13  outlook  to  be  soft, with  revenue  expected  to  dip  5% q-o-q  while  operating  environment  will  remain challenging. For FY13, Unisem expects to stay nimble, conserve cash and spend less on capex (guiding for RM60m-RM70m).

Maintain  NEUTRAL,  FV  nudged  down  to  MYR0.99.  Although  its  FY12  results  were  in line with our estimate, we are cutting our FY13/FY14 core earnings forecasts by 23%/9% respectively  as  we  may  have  been  too  aggressive  in  our  previous  margin  assumptions.  With the lower earnings forecast,  we derive a new FV of RM0.99, based on a 0.7x CY13 P/NTA  (at  a  50%  discount  to  the stock's historical  five-year  sector  average  of  1.4x).  We maintain our NEUTRAL recommendation given the stock's limited upside potential.

 Source: OSK