Unisem: Earnings Improved

Results Update

For QE30/6/2016, Unisem's net profit increased 8% q-o-q or 20% y-o-y to RM38 million while revenue was up a minuscule 1% q-o-q or 7% y-o-y to RM321 million. The profit before tax increased q-o-q primarily due to the higher gain on foreign exchange. Revenue increased y-o-y mainly due to improved average selling prices arising from the appreciation of US$/RM and US$/RMB exchange rates. PBT rose y-o-y due to increased revenue and improved margins from better contribution in its wafer bumping and advanced package operations.  

Table: Unisem's last 8 quarterly results


Chart 3: Unisem's last 47 quarterly results

Valuation

Unisem (closed at RM2.55 last Friday) is now trading at a PE of 11 times (based on last 4 quarters' EPS of 23.59 sen). At this multiple, Unisem - a cyclical stock - is deemed fairly valued. 

Technical Outlook

Unisem broke above the intermediate downtrend line, AB at RM2.46 in early July. It rallied to a high of RM2.79 in the past 2 week. Last Friday, it announced its latest results, which is quite good but its share price tumbled. It closed below the April 2015 high of RM2.65. This could lead to further correction in the days ahead. The immediate support is at RM2.45-2.50.

 
Chart 2: Unisem's weekly chart as at Aug 5, 2016 (Source: ShareInvestor.com)

If the share price can remain above RM2.45, Unisem's breakout may lead to its next upleg.

 
Chart 3: Unisem's monthly chart as at Aug 5, 2016 (Source: ShareInvestor.com)

Conclusion

Based on good financial performance fairly and attractive valuation, Unisem remains a good stock for medium-term investment. Its sudden price correction heralds uncertainty in the near term.

Note:

I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.