Unisem’s subsequent quarters garners different outlooks

KUALA LUMPUR: Unisem (M) Bhd’s (Unisem) subsequent quarters has garnered different outlooks from analysts with some believing that the group will most likely return to the black while others view margins are expected to remain weak.

According to the research arm of Kenanga Investment Bank Bhd (Kenanga Research), subsequent quarters will most likely return to the black as there will not be any more lumpy expenses related to the closure of Unisem’s Batam plant.

“All costs have been recognised in the past three quarters,” Kenanga Research said in its first quarter of financial year 2020 (1QFY20) results note on Unisem.

“There are still 13 workers in the Batam plant that is handling the relocation of the equipment to Chengdu and Ipoh plants to cater for additional capacity.

“The group expects to vacate the Batam plant by end-June 2020.”

Kenanga Research noted that the 100 per cent workforce approval announced by the government on April 28 provides a breath of fresh air as Unisem can now focus on delivering the company’s piling backlog orders.

The research arm further noted that currently operating at 80 per cent, Unisem expects to increase this gradually as the group will still practice working from home for administrative employees.

“While there is li le change in terms of the types of chip packages requested, the group is anticipating more demand from the communication (driven by the increase in 5G base stations) and consumer segments (supported by higher demand for true wireless stereo).”

Meanwhile, Affin Hwang Investment Bank Bhd (AffinHwang Capital) observed that with Unisem’s revenue and margins for the quarter falling to multiyear lows, impacted by plant shutdowns a result of Covid19, the impact could be even more significant in 2Q20.

This was considering that it only saw the tail-end effects of the lockdown in Malaysia during 1Q20, the research firm noted.