Friday 29 Mar 2024
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KUALA LUMPUR (March 31): Inter-Pacific Research has maintained its "neutral" rating on Uchi Technologies Bhd but cut its target price to RM1.97, from RM2.85 previously, after it warned of double-digit revenue declines in US dollar terms for the financial year ending Dec 31, 2020 (FY20) following lower demand.

In a note today, the research house said its main clients, who are located in Europe, are experiencing lockdown situations similar to the movement control order (MCO) here, where only essential goods are allowed to be produced and transported easily.

“Lockdown measures are expected to further tighten as the region’s death toll and confirmed cases continue to rise, which will further weigh down on the economy, as well as Uchi’s sales,” it said.

The research house said Uchi, which specialises in the design of electronic control systems, has ceased production temporarily as the company await approval from the Ministry of International Trade and Industry to resume operations.

Before the restrictions were imposed, capacity utilisation was around 80% to 85%.

“Uchi will maintain a 70% payout of net profits. Based on our forecast, we expect a 10 sen per share dividend payout, an approximate yield of 5.4%,” it said.

Inter-Pacific Research said it expected Uchi to be cautious in its spending and investments given the uncertain economic outlook, with its current allocation for capital expenditure at RM5 million per annum.

“We shift earnings forecast lower, down 8% and 7.6% for FY20 and FY21 (financial year ending Dec 31, 2021) respectively, in view of the production disruptions, but we assume a modest recovery moving into FY21,” it said.

At 11.34am, shares in Uchi rose half a sen or 2.69% to RM1.91, valuing it at RM853.31 million. The counter saw some 211,400 shares traded.

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