Unionmet

Unionmet: The indium manufacturer and supplier recorded net loss of US$2.2m for 2QFYDec14 compared to profit of US$0.3m the year before, weighed down by a one-off disposal loss of US$1.9m from an asset write-down. Meanwhile, revenue improved 10% y/y to US$6m mainly from trading in aluminium and zinc and related products. However, gross margin diminished to a thin 0.6% (-1.6ppts) on the challenging landscape. The smelting industry in China has been in consolidation over the last few years, which prompted Unionmet to undertake a diversification into the property business in Singapore and China, as well as the oil blending business, earlier this year. More recently, Unionmet entered into a working collaboration with one of the research institutes under A*STAR at the start of Jul to research in the oil blending business, as part of the group's diversification strategy. We reckon that investors are better off staying by the sidelines for Unionmet, before any significant progress is shown for its diversification strategy to prove if the management is capable to turn the business into profitability. At $0.062, Unionmet is loss-making and trades at 1.05x P/B.