KUALA LUMPUR (March 15): Hong Leong Investment Bank (HLIB) Research has initiated coverage of Uchi Technologies Bhd at RM3.26 with a “buy” rating and target price (TP) of RM3.83 pegged at 19 times earnings per share for the financial year ending Dec 31, 2022 (FY22 EPS).
In a note today, the research house said this valuation multiple is roughly +1.5 standard deviation (SD) above the five-year historical mean price-earnings (P/E) of 15 times.
“We like Uchi for its: i) stable earnings drivers being the sole supplier and R&D (research and development) partner for its customers; ii) involvement in an indispensable market of the coffee and biotech division that could serve as a future catalyst in this pandemic era; iii) commanding higher margins versus peers; and iv) decent dividend yields of about 5% with tendency to tilt on the high side leading to support of any downside risk,” it said.
Biotech could serve as future catalyst in this pandemic era
HLIB said one of the products in Uchi’s pioneer status list is the ultra-low temperature and mass sensing control system.
It said this device is designed for the storage of biological materials (such as virus, bacteria, eukaryotic cells, stem cell and blood) mainly used in blood banks, hospitals, epidemic prevention services, research institutes and biomedical facilities.
Commenting on Uchi’s dividend policy, HLIB said it is taking a conservative stance and assumes only an 88% payout, translating into a dividend per share of 17 sen to 18.7 sen for FY21-23.
“As of 4QFY20 (the fourth quarter ended Dec 31, 2020), Uchi sat on a net cash position of RM156.7 million (NCPS: 35 sen) with no borrowings on its book,” it said.