KUALA LUMPUR (Sept 4): Hong Leong Investment Bank (HLIB) Research has downgraded its rating of UWC Bhd to "hold" after the integrated engineering supporting services provider’s share price rallied 109% since its last upgrade.

However, the research house raised its target price (TP) to RM6.56, from RM4.90 before, in line with its higher earnings forecasts for the financial year ending July 31, 2021 (FY21) and FY22, and increased the price-earnings (PE) multiple to 38 times earnings per share (EPS) for 2021.

The firm finished the fourth quarter ended July 31, 2020 (4QFY20) with an order book of RM70 million, which was 17% higher than in the previous quarter.

“UWC has received higher orders for chip testers and flash memory test handlers. In addition, it has secured front-end semiconductor equipment customers. The demand momentum for Covid-19 equipment remains robust and contributed strongly to its order book,” said HLIB Research analyst Tan J Young.

He revised his revenue and margin assumptions for FY21 and FY22, resulting in higher core profit projections (up 22% and 25% respectively).

Meanwhile, Tan believes that the higher TP for UWC has factored in the positive catalysts.

“The escalating trade intensity may eventually benefit UWC, which provides a one-stop solution as more companies shift productions out of China to avoid import tariffs,” he said.

At 11.26am, the stock had risen two sen or 3% to RM6.58, valuing the company at RM3.61 billion.