Strong fundamentals drive Unisem growth prospects

KUALA LUMPUR: Unisem (M) is well-positioned for expansion following a strong comeback in the first half of the financial year.The group is benefiting from a bullish outlook on semiconductor applications and consumptions as well as a revamp in the group's operations, which MIDF Research says puts it in a much stronger position to fully tap into the proliferation of 5G and IoT."Besides, we think that its strategic relationship with Tianshui Huatian Technology Co Ltd (TSHT) will further boost its operation expansion given TSHT’s significant presence in China’s semiconductor industry alongside with TSHT’s existing resources and technology," the research firm said in a note.In addition, Unisem also plans to further expand its customer base in correlation to its Chengdu plant expansion in China, it added.Meanwhile, MIDF is positive on the group's recent bonus issue, which went ex yesterday.Unisem had announced a one-for-one issue in Sept 22, 2021, which amounted to an issue of 806.5 million bonus shares."The corporate exercise was undertaken mainly to reward its existing shareholders and it does not change the company’s fundamentals."Nonetheless, we are positive on the bonus issue as the bonus issue increases number of shares of Unisem and improves trading liquidity of Unisem," said MIDF.MIDF maintained its "buy" call on Unisem with an ex-bonus target price of RM5 from the previous target price of RM10.The ex-bonus target price is pegged to FY22 EPS of 18.2 sen against a price-earnings ratio (PER) of 27.4 times, which represents a plus-one standard deviation premium to the company’s two-year average rolling PER of 23.1 times.MIDF said this is premised on strong demand across the products and services especially on wafer level packaging and micro-electro-mechanical systems (MEMs) bump.
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