Improved 3QFY14 results lift Unisem shares and warrants

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KUALA LUMPUR (Oct 31): Both Unisem (M) Bhd shares and its warrants advanced 1.19% and 7.41% respectively, lifted by its improved 3QFY14 financial results.

At 12:07 pm, the semiconductor mother share has climbed 1.19% or 2 sen to RM1.70, with some 3.79 million shares done. Its warrants has surged 7.41% or 1 sen to 14.5 sen, with some 4.5 million shares changing hands.

MIDF Research said in a note today that Unisem management guided that its 4Q14 earnings to be similar to that of 3Q14.

“This guidance implies higher profit margin, which we believe is premised on better product mix. Given such, we are revising upward our FY14 earnings estimate by 26.3%.”

Similarly, MIDF Research has also increased its FY15 earnings by 53.3% with the imputation of higher profit margin.

The research house has upgraded Unisem to a “buy” rating from “neutral” previously with a higher target price of RM2.45 (from RM1.60), premised on FY15 earnings per share of 14.4sen against forward price-earnings ratio multiple of 17 times.

In a separate report today, TA Securities analyst Paul Yap said upon employment of Unisem 2.0, he believed that the business was now more sustainable.

"Repositioning itself into the right product segments, we are more confident on its ability to maintain its growth trajectory.”

The research house is maintaining its “buy” rating on Unisem with higher target price of RM2.40 from RM2.20 previously, based on a PER of 18 times against CY15 earnings per share of 13.3 sen.

Yap said that Unisem expects strong demand from the launch of new smartphones and China’s 4G adoption. For the automotive segment, demand for tyre pressure management systems remain resilient as they are made mandatory for new cars in the US and Europe.

However, he also noted that for the 4QFY14, Unisem management guided for a flattish or 5% decrease in top line, reflecting a seasonally cautious outlook for December due to year end inventory controls.

Yesterday, Unisem posted a net profit of RM27.12 million or 4.02 sen per share for its third quarter ended Sept 30, 2014, a reversal from a net loss of RM648,000 or 0.1 sen per share a year ago.

It attributed the improved earnings to high sales volume, lower overhead cost and better capacity utilisation. Quarterly revenue grew 11% to RM273.27 million, from RM246.78 million.