RHB Research upgrades Unisem Bhd to “buy” on its successful turnaround in profitability and bullish outlook.
It expects a sharp rebound in Unisem’s second half financial year (FY) 2014 performance on improving utilisation rates.
“As such, we upgrade our call to ‘buy’ from ‘neutral’. Our fair value is now revised to RM2.16 as we peg it to a revised price/net tangible assets of 1.4 times from 1.2 times previously, which is the five-year sector average, to our FY 2015 forward forecasts.”
“Unisem’s first half FY 2014 core profit of RM10.7 million trumped expectations on a faster-than-expected recovery in its overall utilisation rate,” it said in its note.
Unisem’s first half FY 2014 revenue of RM479.6 million closed 3.4 per cent lower due to lower sales volumes across the Asia and North America regions.
Earnings before interest, taxes, depreciation and amortisation, however, surged 31.3 per cent to RM102.6 million on a better product mix, lower overhead costs and the cessation of its loss-making European unit in end-2013.
RHB Research said the first half FY 2014 core earnings closed at RM10.7 million as second quarter 2014’s normalised profit of RM10.8 million marked its return to the black after closing in the red for the past five quarters.
“We deem the results as above expectations at 32 per cent of consensus and 56.7 per cent of our full-year forecasts as we foresee improvement in its profitability in the second half.”