KUALA LUMPUR (Jan 8): CIMB Research has downgraded Unisem (M) Bhd to "hold" at RM3.15 with an unchanged target price of RM3.30 in view of its higher share price performance following the joint offers for company takeover, as well as concerns over demand slowdown due to the potential escalation in US-China trade tension.

At the takeover offer close yesterday, the joint offerors — China-based Tianshui Huatian Technology and Tianshui Huatian Electronics Corp — owned 604.5 million Unisem shares, representing 83.13% of the issued share capital of Unisem versus a 24.28% prior to the offer.

In a note today, CIMB Research analyst Mohd Shanaz Noor Azam said Unisem could benefit from having a strong local partner in China that could help the group to forge relationships with potential new customers in the future.

"Moreover, the group indicated that Unisem could enjoy grants and tax incentives from the local government by having a substantial Chinese shareholder in the group," he said.

He also highlighted concerns over escalating US-China trade tensions which has caused semiconductor industry supply chain to experience an inventory correction.

"Our channel checks revealed that most multinational corporations (MNCs) are maintaining low inventory levels due to concerns over weak industry demand pending tariff implementations.

"While we expect group earnings to recover in FY19 forecast, driven by favourable forex and new capacity expansion, the potential escalation in trade tension could affect overall demand growth," he added.

In September last year, Unisem received a joint offer of RM3.30 per share from the joint offerors and existing major shareholders to take over the then 75.72% shareholding in the company not owned by them or parties acting in concert.

Last Thursday (Jan 3), Unisem said it will submit an application to Bursa Malaysia to seek an extension of time to comply with the 25% public spread requirement, which has fallen below the threshold.