Semiconductor sector- a quick look

We are going to compare the financial performance, position & valuation of 3 main semiconductor stocks listed in our exchange, i.e. Gtronic, MPI & Unisem.

Financial Performance

1. Unisem is the only company that managed to grow its turnover in the last 4 quarters up to 31/12/2008, as compared to the preceding 4 quarters. This is due to the contribution from Advanced Interconnect Technologies Limited ("AIT"), which was acquired for a total cash consideration of up to US$70.25 million. The deal was completed on July 18th 2007 and AIT has since been renamed “Unisem (Mauritius) Holdings Limited”.
2. Both Unisem & MPI reported a net loss for the QE31/12/2008. Gtronic is the only company that did not incur any loss during the last 8 quarters.
3. Based on the turnover for the 4 quarters up to 31/12/2008, Gtronic is only about one fifth the size of MPI or Unisem. The smaller size may be a blessing for Gtronic in this difficult times. However, in the event of a strong recovery, both Unisem & MPI share is likely to outpace Gtronic.


Table 1: Gtronic's 8 quarterly results up to 31/12/2008


Table 2: MPI's 8 quarterly results up to 31/12/2008


Table 3: Unisem's 8 quarterly results up to 31/12/2008

Financial Position

1. Gtronic's financial position is healthy, with negligible bank borrowings & very strong liquidity position.
2. MPI's financial position is also satisfactory, with low gearing & acceptable liquidity position.
3. Unisem's financial position is quite shaky, with fairly elevated gearing & inadequate liquidity position.



Valuation

Gtronic appears to be the most attractive stock, with PE at 6 times; Price to Book of 0.6 times; and, Dividend Yield of 20%. The Dividend Yield looks excessively high, so do take that with a pinch of salt. Obviously, between Unisem & MPI, one would expect Unisem to trade at higher multiples than MPI due to Unisem's poor financial position.



Conclusion

Based on the above, we can conclude that Gtronic is both the cheaper & financially healthier stock, among the 3 under consideration. This, plus the earlier post, makes a case for a Trading BUY call for Gtronic. Nevertheless, the semiconductor sector, being a cyclical sector, may not be due for an upswing yet.