April 28, 2011

UNISEM - MIDF cuts Unisem's price target to 2.64: temporary hiccup

Stock Name: UNISEM
Company Name: UNISEM (M) BHD
Research House: MIDF

OSK Research has slashed Unisem (M) Bhd's earnings forecast by 34.1 per cent in view of the sub-par performance and inventory adjustments within the industry, albeit, to a lesser extent.

"We believe the appreciation of the ringgit versus the US dollar and bullish raw material prices will dampen earnings over the near-term while the components shortage in the supply chain will further aggravate the situation," it said in a research note today.

For the first quarter 2011, Unisems's core earnings of RM5.1 million fell short of consensus and OSK Research's estimates at 2.7 per cent and 2.5 per cent of projections respectively due.

Revenue fell 13 per cent for the third consecutive quarter to RM292.0 million as the Ringgit continued to appreciate against the US dollar.

MIDF Research, in a seperate note, said Unisem's first quarter 2011 revenue came in below expectation at only 19.0 per cent of its full year forecast as it had underestimated the extent of the softening sales volume in the quarter.

"Although, we had expected lower sales volume in the first quarter of 2011, it had earlier expected revenue to be within 20 per cent and 21 per cent for the full year.

"However, we expect that revenue will pick up in the subsequent quarter due to rising chip prices as a result of the Japanese earthquake," MIDF added. -- Bernama

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