KUALA LUMPUR (Oct 30): Shares of Unisem (M) Bhd (KL:UNISEM) fell on Wednesday, while analysts slashed their earnings forecasts, following weaker-than-expected quarterly results. 

Results announced on Tuesday (Oct 29) were below market expectations, in spite of a 48% year-on-year and 60% quarter-on-quarter surge in net profit for the quarter ended Sept 30, 2024 (3QFY2024). At least two research houses downgraded the stock.

“As it is embarking on aggressive expansions in both China and Ipoh to capture the opportunities presented by the US-China trade war, we are cautious on the global semiconductor outlook, which is still plagued by inventory adjustment and slower demand,” said Hong Leong Investment Bank.

The house reiterated its “sell” call on the stock after cutting its estimates, noting the company’s guidance for a flat quarter-on-quarter revenue growth in 4QFY2024.

Shares of Unisem have lost more than 8% so far this year, tracking decline in the technology sector amid broader concerns over earnings on exports, which are mostly priced in US dollar, while analysts are also largely cautious on the outlook for the stock.

The Bursa Malaysia Technology Index, which tracks 49 stocks in the sector, peaked on June 13, before losing all of the gains in less than two months, amid fears of a US economic recession. The index’s decline also coincided with the spike in the ringgit against the greenback over the same period.

There are now three “hold”, three “sell”, and only two “buy” calls on Unisem. The consensus 12-month target price is RM3.08, according to Bloomberg, implying a less than 2% gain from its current price.

The recovery of Unisem’s business appears to be “uneven” across segments, Kenanga Investment Bank said. The house also said that there is limited upside to share prices, after cutting its earnings forecasts for FY2024 by 44% and FY2025 by 13%.

Unisem’s shares were down nearly 5%, or 15 sen, to RM3.03 at midday trading break on Wednesday, giving it a market capitalisation of RM4.89 billion.

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