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Monday, July 11, 2016

Unisem: Potential Bullish Breakout

Current Technical Outlook

Last Friday, Unisem broke above the intermediate downtrend line, RR at RM2.46. It rallied to a high of RM2.60- 10 sen short of its April 2015 high of RM2.70- and closed at RM2.54. The price breakout- coupled with MACD above the zero line and +DMI above -DMI - could signal the continuation of Unisem's uptrend after a pause of more than 1 year. (Note: Momentum is still lacking as revealed by ADXR below 20.)


Chart 1: Unisem's weekly chart as at July 8, 2016 (Source: ShareInvestor.com)

If the breakout gathers enough momentum, Unisem's next upleg could go as far as RM5.00.


Chart 2: Unisem's monthly chart as at July 8, 2016 (Source: ShareInvestor.com)

Recent Financial Results

For QE31/3/2016, Unisem's net profit dropped 43% q-o-q but rose 48% y-o-y to RM35 million while revenue was down 10% q-o-q but rose 13% y-o-y to RM318 million. Revenue rose y-o-y mainly due to improved average selling prices arising from the appreciation in the US$/RM and US$/RMB exchange rates. The improvement in net profit was due to increased revenue and improved margins from better contribution in our wafer bumping and advanced package operations. Unisem's packaging operation includes wafer level chip-scale packaging, a high margin product, for customers in the smartphone, PC, and automotive segments. Could this new packaging method enable the company to continue to report higher profits? We have to wait and see. (For more, go to the Star newspaper article dated 30/4/2016.)


Table: Unisem's last 8 quarterly results


Chart 3: Unisem's last 46 quarterly results

Valuation

Unisem (closed at RM2.54 last Friday) is now trading at a PE of 11 times (based on annualized FY14E EPS of 23.05 sen). At this multiple, Unisem - a cyclical stock - is deemed fairly valued.

(Note: The major shareholder of Unisem, John Chia has been buying steadily for the past 8-9 months. Since January, John Chia has added 6 million shares to his direct & indirect holding; raising his total shareholding from 24.9% to 25.8%. For more, go to Unisem's Changes in Shareholding.)
 
Conclusion

Based on improving technical outlook, I revise my rating for Unisem from SELL INTO STRENGTH to a HOLD. Please exercise careful discretion if you choose to trade the breakout as the stock could be at its peak earning now.

Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, Unisem.

3 comments:

steve said...

Hi Alex,

How do you see Presbhd? On both FA and TA point of view?

Thanks!

Alex Lu said...

Hi steve

Presbhd's net profit peaked at RM42 mil in FY2013. It has been sliding ever since then due to a drop in margin from ~35% in FY2013 to ~25% in FY2014 & to ~17% in FY2015. In QE31/3/2016, net profit margin is about 7% only!

One addition factor contributing to the drop in NP margin is the expiry of its pioneer status ion 29/6/2015. This has resulted in its income being subject to tax charges from QE30/9/2015.

The breakdown of the psychological RM2.00 could be the start of the downtrend for the stock. Avoid the stock if you don't have. Sell if you do.

steve said...

Thanks a lot Alex for your comments.

Have a nice day!