UNISEM: Earnings Plummeted Again

Results Update

For QE30/9/2019, Unisem's pre-tax profit dropped 50% q-o-q or 75% y-o-y to RM10 million  while revenue was mix- rose 1.4% q-o-q but dropped 10.8% y-o-y to RM316 million. The lower pre-tax profit was primarily attributable to net expenses incurred on severance against reversal of retirement benefits in PT Unisem.

Unisem reported a loss after tax due to higher effective tax rate arising from the reversal of retirement benefits in PT Unisem amounting to RM6.53 million as well as the losses of a subsidiary company which cannot be used to offset against profits of other companies in the Group.

Table: Unisem's last 8 quarterly results


Graph: Unisem's last 60 quarterly results

Financial Position

As at 30/9/2019, Unisem's financial position is deemed satisfactory with current ratio at 2.6 times while gearing ratio at 0.3 time.

Valuation

Unisem (closed at RM2.56 yesterday) is now trading at a PE of 45 times (based on last 4 quarters' EPS of 5.61 sen). At this PER, Unisem is deemed overvalued.

Technical Outlook

Recently, Unisem rebounded to test its downtrend line at RM2.60. While it went above the downtrend line, the breakout could have sustained.


Chart: Unisem's monthly chart as at Oct 25, 2019 (Source: Malaysiastock.biz)

Conclusion

Based on weaker financial performance and bearish technical outlook, I rate Unisem as a SELL.

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.