Wednesday, July 14, 2010

AmResearch affirms Buy on MPI, Unisem

KUALA LUMPUR: AmResearch has affirmed its Buy on MALAYSIAN PACIFIC INDUSTRIES [] and Unisem as it expects the chip makers to ride on the optimistic outlook for the industry after Intel posted a strong set of earnings.

In its research note, AmResearch said on Wednesday, July 14 that Intel's 2Q10 result of US$10.7bil beat the average street forecast for the current quarter.

For 2Q, ended June 26, Intel's revenue rose 34% to US$10.77 billion, from US$8.02 billion a year ago. Intel also expects 3Q10 to further chart sequential growth; predicting a rake in revenue of US$11.2 billion to US$12 billion, surpassing analysts' forecasts of US$10.92 billion.

Intel cited that the strong revenue imputes a replenishment demand for laptops and desktops. In addition to traditional demand, Intel has also seen diverse demand for its laptop, desktop and server. Operating margins should remain high.

"Current margin for Taiwanese companies; are between 11.5%- 15.0%, comparable to Unisem's and MPI's margin of between 11% and 13.9%. Intel's 2Q10 sends a very positive signal for Unisem and MPI to chart a similar pattern.

"We affirm our BUY on MPI (FV=RM8.90, 1.7x price-to-book) and Unisem (FV=RM3.80, 1.9x price-to-book). Our valuation is still below peak boom time 2.3x price-to-book observed in 2004-2005.'' Unisem stands to exploit more from constraints as its China operation would be coming on stream as early as end 3Q10," it said.

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