MORNING CALL:31/7/23

Kenanga Research said it likes Unisem but there is still looming uncertainty in the immediate term

Transcript

00:00 Good morning, we're looking at Unisem this Monday morning.

00:04 Kenanga Research downgrading the stock to underperform from market perform.

00:08 Target price RM2.65, send down from RM2.75 previously.

00:13 Unisem last traded at RM3.17.

00:16 Last week, Unisem reported its first half FY23 results.

00:20 Kenanga said net profit disappointed as the loading volume from Unisem's customers

00:25 remained subdued amid the oversupply situation.

00:28 First half FY23 core net profit at RM33.8 million accounted for only 24% of Kenanga's

00:34 full-year forecast and 19% of consensus estimates, according to Kenanga.

00:39 Quarter-on-quarter, Unisem is guiding for a flattish third-quarter FY23 revenue outlook

00:45 due to the lack of order visibility.

00:47 The group indicating there is an absence of a ramp-up in smartphone-related chips, despite

00:52 the seasonal launch of a US smartphone in the third quarter of this year, which is unheard

00:56 of in the past.

00:58 On the whole, Kenanga said it likes Unisem, but there is still looming uncertainty in

01:03 the immediate term, which has resulted in cautious order replenishment among customers.

01:08 The research house cut its earnings forecasts by 15% for FY23 and 4% for FY24.

01:15 It also said the stock's valuations have become stretched after the recent run-up in

01:20 its share price.

01:21 So what's the consensus?

01:23 According to Bloomberg data, analysts aren't too upbeat on Unisem at the moment.

01:27 We've got four holes and four cells, with target prices averaging out to RM2.78.

01:33 Unisem ended trading on Friday at RM3.17, so that's a potential downside of about 12%.

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