Translate This Page

Tuesday, December 31, 2013

Affin Research upgrades Unisem to Buy, target price RM1.39 (Star)

Affin Investment Research has upgraded Unisem to a Buy with a target price of RM1.39 and it believes the worst is over for the company.

It said on Tuesday that after two consecutive years of financial losses, management in a recent meeting guided that the worse could be over as the group has restructured itself and is in a position to sail back into profitability in 2014.
“Over the past few quarters, management has focused on product discontinuation of low volume products and has sought to raise average selling prices (ASPs) for others. More recently, Unisem further rationalised its headcount in Batam and decided to shut its Wales operations,” it said.’
Affin Research said Unisem anagement’s decision to close its Europe plant was due to: 1) Wales being no longer profitable; and 2) having adopted a new business strategy where management are more focus towards top tier and mid customer rather than new entrants in the industry.
“Collectively, Batam and Wales have been a drag to Unisem to the tune of RM15mil to RM20mil in losses over the past few years,” it said.
The research house said the management guided that the turnaround in Batam plant was already bearing fruit and had turned earnings before interest, tax, depreciation and amortisation (EBITDA) positive in November 2013.
“We expect Unisem to register its final quarter of loss in 4Q13 on further restructuring charges, but expect a sharp turnaround in profitability in 2014 due to Unisem’s leaner operating structure.
“Without losses from Wales and Batam as well as continued profitability from its Ipoh and China units, we project that Unisem can achieve a FY14 net profit of RM44.2mil (previously RM16.1mil). Our FY13-15
EPS forecast is raised by -14%/+175%/139% respectively on our more upbeat prospects for the company,” it said.

No comments: