Unisem: Earnings Plummeted

Results Update

For QE31/13/2018, Unisem's net profit dropped 81% q-o-q or 87% y-o-y to RM6 million  while revenue dropped 10% q-o-q or 11% y-o-y to RM322 million. Revenue dropped 10.0% y-o-y due to lower revenue in USA and Asia of 3.5% and 21.8% respectively whilst Europe’s segment revenue increased by 2.4%. The decrease in revenue was mainly attributable to the depreciation of USD/MYR exchange rate. The decline in net profit was mainly due to depreciation of USD/MYR exchange rate coupled with lower profit margins arising from change in product mix as well as the recognition of foreign exchange losses of RM9.950 million in the current financial quarter.

Table: Unisem's last 8 quarterly results


Graph: Unisem's last 54 quarterly results

Valuation

Unisem (at RM1.80 as at 4.00pm) is now trading at a PE of 11 times (based on last 4 quarters' EPS of 16.4 sen). At this multiple, Unisem is deemed fairly valued. However we have to wrestle with the big question of whether Unisem's earning has peaked. If earning has peaked, then it will likely to continue to trend lower and so would the share price.

Technical Outlook

Unisem broke its long-term uptrend line, SS at RM2.60 in February. Today it even broke the psychological RM2.00 mark. the next support will be from horizontal lines at RM1.80 & RM1.60.


Chart: Unisem's monthly chart as at Apr 25, 2018_10.00am (Source: Shareinvestor.com)

Conclusion

Based on poor financial performance & bearish technical outlook, Unisem has become a stock in search of a bottom. Despite the sharp decline, we have to be careful when approaching this stock because it could have turned into a value trap in the event its earning has peaked.

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.