Unisem (M) Bhd
(July 23, RM2.33)
Maintain neutral with an unchanged target price of RM2.51: Unisem is set to release its results for the second quarter of financial year 2015 (2QFY15) next week.
We expect Unisem’s 2QFY15 core earnings to come in at between RM28 million and RM35 million, boosted by the favourable US dollar environment, which averaged at RM3.66 vis-à-vis 2QFY14’s RM3.23 and 1QFY15’s RM3.39.
Foreign exchange aside, we believe the sales momentum is likely to be driven by its wafer-level packaging and bumping division, and we also expect the group to make further inroads in expanding its communications-related market segment.
We do not expect any dividend to be announced for the quarter, as our FY15F (forecast) dividend per share of seven sen is likely to be announced in Unisem’s results release for the second half of FY15.
Unisem’s outstanding share base has increased to 695.6 million from 674.2 million as at Dec 31, 2014, due to outstanding warrants and employee stock option scheme (Esos) conversion.
We expect full conversion to take place by August, given that its existing warrants at an exercise price of RM2.18 — and which will expire by Aug 24 — are currently trading at a slight discount, while its Esos, which is at an exercise price of RM2.25, is set to expire by Aug 9, albeit with an optional extension for an additional five years.
Assuming full conversion for both, Unisem’s share base will increase 26.9% to 855.8 million, with a corresponding dilution in our earnings per share (EPS) estimates.
We are upgrading our FY15 and FY16 EPS by 4.2% to 8.6% as we revise our US dollar to ringgit assumptions to RM3.76 for 2015 and RM3.65 for 2016, from RM3.60 previously.
We have also tweaked our cost structure, following the release of its 2014 annual report.
Key risks include a strengthening of the ringgit against the US dollar, higher raw material costs and a slowdown in the global semiconductor market. — RHB Research, July 23
This article first appeared in The Edge Financial Daily, on July 24, 2015.