KUALA LUMPUR: Semiconductor player Unisem (M) Bhd expects revenue to grow at a faster 10% pace this year on increased global demand for leadless, chip-scale and wafer-bumping packages.
Chairman and group managing director John Chia Sin Tet foresees a 5% to 10% growth in the automotive and sensor sector, which contributes about 20% of its revenue.
Unisem returned to the black with a net profit of RM68.42 million for the financial year ended Dec 31, 2014 (FY14), compared with a net loss of RM105.37 million in FY13. Revenue grew 4.8% to RM1.04 billion from RM990.56 million.
Speaking to reporters after the group’s annual general meeting yesterday, Chia said as sales grow, net profit for FY15 is also expected to increase — though he did not provide a specific figure — as Unisem has adopted a new business strategy of consolidating technology and reducing manpower.
“The leadless and chip-scale packages are currently in high demand in smartphones because the size is smaller and the technology is very advanced. Both the leadless and chip-scale packages see about a 30% contribution to the group’s revenue, while the leaded packages have dropped to 20%,” he said.
He explained that the restructuring of Unisem’s business, which saw it moving from a 1970s technology of leaded package to chip-scale package, requires less workforce, which has helped free up factory space by 20% to 25%.
He said that its increased RM100 million capital expenditure (capex) this year, at 33% of its earnings before interest, taxes, depreciation and amortisation (Ebitda), is to enhance the capacity of its leadless, chip-scale and wafer-bumping packages.
“So far, we have spent RM40 million to RM60 million in this area as well as the auto segment. We see a strong pickup in the second half of the year, especially in the smartphone and auto sectors.
“Unlike the [robust] smartphone segment, which contributes 40% to our revenue, we expect the auto sector to grow steadily between 5% and 10% year-on-year,” he said.
He said with the increased government policies on safety car features in the United States and Europe, the auto industry is expected to see more inclusion of electronic components, which benefited the group’s business.
Chia noted that this sector has a longer gestation period for growth as it depends on the legislation of automotive laws mandating higher safety features in vehicles, and the existence of such laws will see increased demand for electronic components in vehicles.
Unisem presently commands 2% of the global semiconductor market. Chia said the group, through its three Asian plants, caters to customers who serve big mobile brands like Apple, Samsung, Xiaomi and Lenovo — which form 98% of its customer base — besides those from the automotive industry.
Chia also expressed confidence that Unisem will be able to clear its net debt of RM150 million by year end.
“We have a RM200 million debt and RM50 million cash. We think that this year our Ebitda/cash flow will be in excess of RM300 million. If you take away RM100 million for capex, you have RM200 million left for reduction of debts and some dividends. So I think we will be very close to net debt zero/debt free by end of the year.”
He said the group will start enhancing its dividend payout once the debt level has been brought down to zero or when it is in a net cash position.
Unisem’s (fundamental: 1.25; valuation: 0.6) net profit almost tripled to RM23.9 million in its first quarter ended March 31 from RM8.8 million a year ago, as a result of a change in product mix and improved utilisation rates.
Its counter closed down two sen or 0.82% at RM2.43 yesterday, for a market capitalisation of RM1.61 billion.
This article first appeared in The Edge Financial Daily, on May 7, 2015.