INVESTMENT HIGHLIGHTS

• John Chia and its Chinese counterpart launched take-over offer at RM3.30 per share

• Listing status and management team of Unisem to be maintain upon completion of the exercise

• Complimentary business case between Unisem and the Chinese offerors

• Recommend to accept offer and shift focus to its listed peers who offer better earnings quality

Take-offer offer by the executive chairman and its Chinese counterpart. The Malaysian offerors, which is lead by John Chia who is the managing director and chairman of Unisem, and Chinese offerors, which is lead by Tianshui Huatian Electronics Group Co. Ltd, intend to undertake a voluntary conditional take-over offer to acquire all the remaining ordinary shares in Unisem (M) Berhad not owned by the Malaysian offerors with an offer price of RM3.30 per share.

Details of the exercise. Under the agreement, the Chinese offerors will acquired the entire offer share in cash. In addition, the joint offerors intend to maintain the listing status and the management team of Unisem. Subsequent to the completion of the offer, the Malaysian offerors will an option to acquire Unisem shares from the Chinese offerors from the first anniversary of the completion of the offer and expiring on the fourth anniversary of the completion of the offer, at the call option price.

The exercise will pathway to greater business opportunities for the joint offerors. As part of the undertaking, the joint offerors have entered into a collaboration agreement to form a strategic partnership. Under the agreement, the Chinese offerors would be able to strengthen its global presence by leveraging on Unisem’s relationships with its vast network of customers in Europe and North America. In return, Unisem would be expand more rapidly in its Chengdu’s operation by tapping into the Chinese offerors’ presence in China who is amongst the largest outsourced semiconductor assembly and test players worldwide.

Attractive premium on offer price of over 10%. The offer price translates into an attractive premium of +11.1% and +73.7% based on Unisem last closing price of RM2.97 and our fair value of RM1.90 respectively. Our fair value is premised on pegging FY19 EPS of 15.2sen against forward PER multiple of 12.5x which is the group’s 3 year historical average PER.

Source: MIDF Research - 13 Sept 2018