MPI, Unisem up on CIMB Research upgrade

KUALA LUMPUR: Shares of MPI and Unisem bucked the weaker market on Wednesday, Jan 13 after CIMB Equities Research upgraded the semiconductor sector from trading buy to overweight as it believes the worst is over.

At 10.43am, MPI was up 10 sen to RM6.44 and Unisem gained six sen to RM2.16.

The FBM KLCI fell 3.85 points to 1,289. Turnover was 537.41 million shares valued at RM474.32 million.

CIMB Research said the semiconductor sector was buffeted by the global financial crisis in the early part of 2009 but swiftly recovered.

"We believe the worst is behind us. Fundamentals are improving as the demand equation is set to swing closer to equilibrium; the global economy is gradually reviving; the key end user markets are forecasting stronger growth; inventory in the industry is tight and a potential corporate replacement cycle may kick in," it said.

It upgraded the sector from Trading Buy to an outright Overweight with Unisem being its top pick for its more liquid nature and higher beta.

"The potential re-rating catalysts for the sector are a sooner-than-expected revival of end-user demand, a faster-than-expected economic recovery and the upcoming 4Q09 results season for tech majors which are expected to show improvement on 3Q earnings," it added.

Its target price for Unisem was raised from RM2.29 to RM2.70 after updating its five-year historical average price to book value and valuing it a 30% premium instead of a 10% discount in light of the positive outlook for the industry and Unisem's strong growth potential.

As for MPI, CIMB Research's target price was maintained at RM8.16. It still valued MPI at a discount compared to the premium attached to Unisem because of MPI's illiquidity, lower free float and its lower beta.

Factors that could catalyse MPI's share price include its laggard status, investors' high risk appetites and the revival of end-user demand.