KUALA LUMPUR (Oct 26): Unisem Bhd’s share price soared 57 sen or 12.95% to an intra-morning high of RM4.97 — the highest level in at least 10 years, buoyed by the bullish sentiment reaffirmed by its latest set of quarterly earnings.
Unisem, which was the fourth top gainer on Bursa Malaysia, saw its market capitalisation rise to RM3.48 billion.
At noon break, it closed at RM4.97. The stock closed at RM4.90, up 50 sen to RM4.90.
The stock shot up 219% from its trough of RM1.56 on April 3.
Investment analysts who track the stock have either upgraded or reaffirmed their "buy" recommendation on the semiconductor manufacturer, saying the third quarter ended Sept 30, 2020 (3QFY20) results beat their expectations.
Unisem announced a net profit of RM49.45 million for 3QFY20 last week, with its revenue climbing to RM357.68 million.
CGS-CIMB Research analyst Mohd Shanaz Noor Azam reiterated his “add” call on Unisem, given the stronger earnings prospects.
The research house raised its target price to RM5.50 (from RM4.25), as it is forecasting Unisem’s net profit for the financial year ending Dec 31, 2020 (FY20), FY21 and FY22 to soar to RM115.1 million, RM149.7 million, and RM183.3 million.
“We expect the group to maintain a higher capex level in excess of RM200 million/year in 2020-2021F to support its new programmes for RF [radio frequency], power management chips and microphone sensors.
“We [also] raise our FY20-22F EPS [earnings per share] by 17%-24% to account for higher utilisation and new capacity expansion,” said Mohd Shanaz in a note today.
He added: “The stock currently trades at 21.5x FY20F P/E, which is 20% below the FY21F sector mean P/E of 26.8x.”
Meanwhile, MIDF Research said Unisem’s financial performance for the cumulative nine-month period (9MFY20) has exceeded its consensus expectations by a variance of more than 10%.
Post its earnings adjustment, it raised Unisem’s target price to RM5.86 (from RM3.10), as well as upgraded the group to a “buy” call.
“This is premised on pegging revised FY21 EPS of 25.8 sen against forward PER of 22.7x which represents 1.5 standard deviation premium to the company’s two-year average rolling PER of 18.7x,” said MIDF Research analyst Martin Foo Chuan Loong.
Moreover, Foo also revised Unisem’s FY20-FY22F earnings estimates to RM135.4 million to RM204.7 million due to higher revenue assumption from across all its market segments with the exception of the automotive segment, which in turn led to healthier profit margin.
Meanwhile, RHB Research Institute has also reaffirmed its “buy” rating with a higher target price of RM5.50 (from RM3.72). Following Unisem’s robust results and strong order visibility, the research house has imputed higher sales and margin assumptions on the group.
Its analyst Lee Meng Horng said he has revised the group’s FY20F-FY22F earnings forecasts upwards by 39% to 48% as he expected the group’s momentum to carry through to the next few quarters given the strong visibility of orders and project pipeline, thanks to the overall robust demand.
RHB is forecasting Unisem’s net profit to climb to RM136 million to RM180 million for FY20 until FY22.
“Trading at only 20x FY21F P/E, we believe the huge discount to the other OSATs [outsourced semiconductor assembly and test] players (>30x P/E) is bound to narrow on renewed optimism in earnings visibility and growth outlook as well as continued strong results in the coming quarters. Short-term share price may be capped by the overhang from a potential share placement.
“Risks to our call include a prolonged pandemic affecting demand, lower-than-expected orders, and stronger-than-expected RM vs the USD,” said the RHB analyst.