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UCHI Technologies Bhd

UCHI Technologies (Uchitec) (Fundamental: 2.4/3, Valuation: 1.5/3) is mainly involved in the original design manufacturing of electronic control systems for electrical and electronic appliances.

Currently, the company’s sales are derived from two main product groups: Art-of-Living — high-end consumer electrical appliances including fully-auto coffee machines, and Biotechnology — laboratory and industrial equipment.  

Whilst growth has not been “exciting”, earnings have held fairly steady. That has helped Uchitec maintain consistent stream of dividends. Payout ratio has exceeded 90% of annual net profit since 2011.

For 2014, dividends totaled 10 sen per share — up from 9.63 sen in 2013 though lower than the 12 sen in 2010-2012 — or equivalent to payout ratio of 93.4%. That gives shareholders a net yield of 6.1%. Higher than market average yields has likely helped its share price trend broadly higher over the past 3 years — rising at a CAGR of 18% — amid range-bound earnings.

It still has sizeable net cash of RM127.7 million or 34 sen per share at end-March, about 20% of its current market capitalisation. 

Exports to Europe account for 94.8% of Uchitec’s revenue, with Switzerland and Germany being key markets. Despite the eurozone’s sluggish economic growth, since the global financial crisis in 2008-2009, Uchitec’s earnings have remained comparatively resilient. 

Net profit ranged from RM39-RM53 million since 2010 with net margin hovering between 41% and 52%. For 1Q2015, net profit was a marginal 1% higher y-y at RM10.3 million on the back of 11.1% increase in revenue to RM25.6 million. 

At RM1.64, Uchitec is trading at 2.98 times book with trailing 12-month P/E of 15.41 times.

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This article first appeared in The Edge Financial Daily, on June 24, 2015.

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