UOB Keeps Unisem At Sell; MYR0.99 Target

UOB KayHian maintains Unisem (5005.KU) at Sell with a MYR0.99 target price as the house expects the company's earnings to contract by 54% on-year for 2011. It says Unisem's upcoming 2Q11 is likely to be impacted by the prolonged weakness in demand; "orders from customers are based on global economic outlook and consumer sentiments, where there is still a lot of pessimism." The company adds that the company had guided a 5-6% sequential growth in topline in 2Q11, but if Unisem manages to meet their internal targets, revenue for 1H11 will still be at least 12% lower than a year before. Also, RHB says the minor recovery in sales could have been faster and more immediate if not for the weakening USD in 2Q11. "Higher costs of outsourcing in US$ will reduce the attractiveness of outsourcing from Unisem's foreign Integrated Device Manufacturers (IDM) clients." The stock is down 0.6% at MYR1.56.