STOCK FOCUS OF THE DAY
Unisem : Growth on track but valuation rich HOLD
We maintain HOLD on Unisem with unchanged forecasts and a fair value of RM3.32/share, pegged to FY18F PE of 13x. Unisem's 2QFY17 core net profit came in within our expectation and consensus at RM42mil. The quarterly net profit represents a QoQ decline of 6% and a YoY growth of 12%. Cumulatively, 1HFY17 core net profit of RM87mil (+20% YoY) accounted for 46% of our full-year forecast and 47% of consensus.
Management said that the revenue improvement (in terms of USD) was underpinned by strong demand in new businesses, namely rental-bike systems, microphones and memory (SSD/DDR) power management integrated circuits. For 3QFY17F, management expects the group to register a QoQ growth of 5%. We believe this is achievable as 2H is normally a stronger period for semiconductor sales. Although signs are pointing toward decent earnings growth, we believe that Unisem's rich valuation has already priced in its positive prospects. Unisem is currently trading at FY18F PE of 16x, which represents 1SD above its 3-year historical average.
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