Thursday 28 Mar 2024
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KUALA LUMPUR (June 5): Shares in UWC Bhd rose as much as 5.1% in mid-morning trade today after the group reported a 65% jump in its latest quarterly net profit on the back of stronger demand from semiconductor customers globally.

As at 9.57am, the integrated engineering support services provider had risen 17 sen to RM3.31, bringing the market capitalisation of the group to RM1.73 billion. It saw some 40.05 million shares traded, over five times its 200-day average trading volume of 7.53 million.

According to a filing with Bursa Malaysia yesterday, the group’s net profit rose to RM14.59 million for the third quarter ended April 30, 2020 (3QFY20), from RM8.82 million previously. Meanwhile, revenue increased by 46% to RM55.8 million from RM38.31 million a year ago.

UWC’s cumulative nine-month net profit also shot up by 60% to RM39.12 million, from RM26.16 million for the previous corresponding quarter, underpinned by a 62% increase in revenue to RM157.64 million from RM97.45 million.

In a note today, Hong Leong Investment Bank Research (HLIB) analyst Tan J Young upgraded his call on UWC to "buy" from "hold" previously, and raised the target price (TP) to RM3.45 from RM2.59 previously, reflecting the research house’s higher estimates of UWC’s earnings and price-earnings (PE) multiple.

“Our TP is derived based on 28 times (previously 23 times) CY21 (calendar year 2021) EPS (earnings per share),” he said.

Tan opined that UWC deserves a higher PE multiple given its solid growth trajectory ahead, leveraging on its expansion plan.

He noted that the escalating trade intensity may eventually benefit the group, which provides a one-stop solution, as more companies move their production out of China to avoid import tariffs.

UWC is optimistic about its long-term performance despite trade tensions and the global Covid-19 pandemic, Tan added.

“[The] semiconductor [sector] will be driven by demand to support remote working, 5G and AI adoptions. As for life science, UWC is expediting the qualification of selected items and continue to work closely with customers for future developments.

“We tweaked our FY20-22 revenue assumptions, which eventually lifted our core net profit projections by 3%, 6% and 14% respectively,” Tan noted.

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