CIMB: Unisem re-rating catalysts include ringgit depreciation, stronger earnings
KUALA LUMPUR (Feb 12): CIMB Investment Bank Bhd said stronger earnings delivery, depreciation of the ringgit versus the US dollar and higher dividends are potential re-rating catalysts for Unisem (M) Bhd.
CIMB analyst Mohd Shanaz Noor Azam wrote in a report today that CIMB believes the market has largely priced in the negative impact of the strengthening ringgit on semiconductor manufacturer Unisem’s earnings.
“Hence, we see the recent pullback in share price as a good buying opportunity; we believe fundamentals are intact, underpinned by healthy demand as underlying US dollar sales rose 8.4% y-o-y in 9M17. It guides for healthy 7-8% US dollar revenue growth in FY18F on capacity expansion and robust industry demand,” Mohd Shanaz said.
He said a stronger ringgit is negative for Unisem as almost 100% of its sales are derived in US dollars versus only 40% to 45% of its cost.
“We estimate every 1% appreciation in the ringgit will reduce the group earnings by 2.5%,” Mohd Shanaz said. At 11:43am, the ringgit was traded at 3.9320 against the US dollar. At 11:54am, Unisem shares changed hands at RM2.84.
Source: The Edge