Stock Name: UNISEM
Company Name: UNISEM (M) BHD
Research House: AMMB
Unisem (M) Bhd
(April 1, RM2.74)
Maintain buy at RM2.68 with higher fair value of RM3.80: We maintain buy on Unisem with higher fair value of RM3.80 per share (RM3.30 previously) based
on price-to-book value (P/BV) of 1.9 times (1.7 times previously).
We rerate our multiple to be in line with a valuation it fetched during its last upcycle circa 2004-2005.
Following our company visit, we are raising out earnings estimate by 19% in FY10 and 41% in FY11 due to a 12.1% increase in revenue, prompted by stronger-than-previously expected order growth. First quarter FY10 alone may see sequential growth of more 9%, and we expect it to continue into 4Q10. Previously, we were only expecting 5%-7% growth. This puts us 43% ahead of consensus.
This takes into account that it still has spare capacity to fulfil demand growth of up to 20%, relative pricing power due to a supply glut, dividend surprise in FY10 and liquidity premium.
Global order strengths have gained traction since our last visit. Measured in sequential quarterly growth, global orders may exceed 45% in 1Q10 (versus 27% in 4Q09).
Within the industry's visible order, we expect pace of growth to strengthen. Industry's book-to-bill ratio has increased to 1.23 (1.07 from our previous visit), following seven consecutive months of above-1 time ratio.
More significantly it is happening in an environment of growing orders. Prior to that, book-to-bill ratio had dipped below one time for almost 35 straight months. It has not gone above 1.2 times since the dotcom bust.
More importantly, Unisem would be a leader in tapping this surge in demand, thanks to its capacity build-up. Unisem's plant in China may have received 10%-15% more orders in 1Q09. Parallel to that, it had not seen significant deterioration in turnover.
Despite global orders for plant equipment having registered around 10% QoQ growth 1Q09, we estimate this would only come on stream by 2Q11.
We are looking at a possible dividend of 10 sen per share, yielding 4.5%. Free cash flow generation should improve from 20 sen per share to 50 sen backed by new earnings estimates and firm capex of RM100 million. - AmResearch, April 1
This article appeared in The Edge Financial Daily, April 2, 2010.
Company Name: UNISEM (M) BHD
Research House: AMMB
Unisem (M) Bhd
(April 1, RM2.74)
Maintain buy at RM2.68 with higher fair value of RM3.80: We maintain buy on Unisem with higher fair value of RM3.80 per share (RM3.30 previously) based
on price-to-book value (P/BV) of 1.9 times (1.7 times previously).
We rerate our multiple to be in line with a valuation it fetched during its last upcycle circa 2004-2005.
Following our company visit, we are raising out earnings estimate by 19% in FY10 and 41% in FY11 due to a 12.1% increase in revenue, prompted by stronger-than-previously expected order growth. First quarter FY10 alone may see sequential growth of more 9%, and we expect it to continue into 4Q10. Previously, we were only expecting 5%-7% growth. This puts us 43% ahead of consensus.
This takes into account that it still has spare capacity to fulfil demand growth of up to 20%, relative pricing power due to a supply glut, dividend surprise in FY10 and liquidity premium.
Global order strengths have gained traction since our last visit. Measured in sequential quarterly growth, global orders may exceed 45% in 1Q10 (versus 27% in 4Q09).
Within the industry's visible order, we expect pace of growth to strengthen. Industry's book-to-bill ratio has increased to 1.23 (1.07 from our previous visit), following seven consecutive months of above-1 time ratio.
More significantly it is happening in an environment of growing orders. Prior to that, book-to-bill ratio had dipped below one time for almost 35 straight months. It has not gone above 1.2 times since the dotcom bust.
More importantly, Unisem would be a leader in tapping this surge in demand, thanks to its capacity build-up. Unisem's plant in China may have received 10%-15% more orders in 1Q09. Parallel to that, it had not seen significant deterioration in turnover.
Despite global orders for plant equipment having registered around 10% QoQ growth 1Q09, we estimate this would only come on stream by 2Q11.
We are looking at a possible dividend of 10 sen per share, yielding 4.5%. Free cash flow generation should improve from 20 sen per share to 50 sen backed by new earnings estimates and firm capex of RM100 million. - AmResearch, April 1
This article appeared in The Edge Financial Daily, April 2, 2010.
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