KUALA LUMPUR: A minimum wage increase and proposal to mandate Employees Provident Fund (EPF) contribution to foreign workers could affect Unisem (M) Bhd's earnings.
CIMB Securities estimated this to reduce Unisem's earnings per share (EPS) by an additional 3.0-4.0 per cent.
The firm also revised its financial year 2024 to financial year 2026 (FY24-FY26) for Unisem's EPS projection down by 12 per debt and 16 per cent respectively.
"This follows a weaker-than-expected sales guidance for the fourth quarter of 2024 (4Q24) and forex impact," it said in a note.
The company's net profit increased 48 per cent in the third quarter of 2024 (3Q24), while revenue rose by 15 per cent.
CIMB Securities has maintained its 'Hold' rating on the stock with a lower target price of RM3.25 from RM3.98.
The firm said it is based on a lower 30 times calendar year 2026 (CY26) price to earnings ratio (P/E) which is 1 standard deviation below the Malaysian outsourced semiconductor assembly and test.
"This adjustment, previously at 0.5 standard deviation above mean, owes to weaker tech sector sentiment," it added.
According to CIMB Securities, potential catalysts for the stock include a higher customer take-up rate, a shorter ramp-up period at the Unisem Chengdu Phase 3 and Gopeng facilities, new customer acquisitions due to global supply chain shifts and an increased dividend