UCHITEC (7100) - Uchi Technologies - Stronger brew
Target RM1.46 (Stock Rating: HOLD)
Uchi’s FY14 core EPS was largely in line, accounting for 104% of our and 99% of consensus full-year estimates. Core net profit rose 3.8% yoy, mainly driven by a lower effective tax rate following the approval of its pioneer status by MIDA. We raised our FY15-16 EPS forecast by 4-5% to account for potentially higher contribution from bio-tech segments this year as management plans to introduce several new products to drive growth. We maintain Hold rating with a higher target price of RM1.46 is based on 11.3x CY16 P/E (at a lower 25% discount to our target market P/E of 15x (vs 35% prev), as we expect Uchi to benefit from a stronger US$ and recovering economic environment in Europe, its main market. The stock offers an attractive FY15-16 yield of 7.2-7.5%. However, we prefer MPI for better exposure to tech stocks.
4Q14 highlights
Revenue grew by 14.4% yoy from RM21.3m in 4Q13 to RM24.4m in 4Q14 due to higher sales volume. As a result of higher operating leverage, EBITDA margin also grew by 3.7% pts from 45.7% to 49.4%. Despite this, Uchi recorded a lower core net profit of RM12.2m vs. RM15.2m last year, mainly due to a reversal in its tax pioneer status by Malaysia Investment Development Authority (MIDA) in Dec 13. The company declared a final dividend of 5 sen, bringing the total dividend for FY14 to 10 sen which was below our expectation of 11 sen.
Moderate growth outlook for FY15
We expect earnings to grow stronger in FY15 compared to last year due to the potential contribution from new bio-tech products. While management is guiding for flat shipment volume this year, we expect earnings to improve on the back of higher contribution from bio-tech products which offer higher margins. Uchi is committed to growing its bio-tech segment to 50% of group revenue, from 24% currently, within the next three years. We think this is a good diversification strategy but it will be a gradual process as its art-of-living products currently account for 75% of its total revenue.
Dividends the bright spot
We see limited upside potential from the current levels, but maintain our Hold rating due to its decent dividend yield support of 7.2% for FY15, and its net cash position of RM133m. Switch to MPI for better exposure to tech stocks.
Source: CIMB Daybreak - 27 February 2015
Target RM1.46 (Stock Rating: HOLD)
Uchi’s FY14 core EPS was largely in line, accounting for 104% of our and 99% of consensus full-year estimates. Core net profit rose 3.8% yoy, mainly driven by a lower effective tax rate following the approval of its pioneer status by MIDA. We raised our FY15-16 EPS forecast by 4-5% to account for potentially higher contribution from bio-tech segments this year as management plans to introduce several new products to drive growth. We maintain Hold rating with a higher target price of RM1.46 is based on 11.3x CY16 P/E (at a lower 25% discount to our target market P/E of 15x (vs 35% prev), as we expect Uchi to benefit from a stronger US$ and recovering economic environment in Europe, its main market. The stock offers an attractive FY15-16 yield of 7.2-7.5%. However, we prefer MPI for better exposure to tech stocks.
4Q14 highlights
Revenue grew by 14.4% yoy from RM21.3m in 4Q13 to RM24.4m in 4Q14 due to higher sales volume. As a result of higher operating leverage, EBITDA margin also grew by 3.7% pts from 45.7% to 49.4%. Despite this, Uchi recorded a lower core net profit of RM12.2m vs. RM15.2m last year, mainly due to a reversal in its tax pioneer status by Malaysia Investment Development Authority (MIDA) in Dec 13. The company declared a final dividend of 5 sen, bringing the total dividend for FY14 to 10 sen which was below our expectation of 11 sen.
Moderate growth outlook for FY15
We expect earnings to grow stronger in FY15 compared to last year due to the potential contribution from new bio-tech products. While management is guiding for flat shipment volume this year, we expect earnings to improve on the back of higher contribution from bio-tech products which offer higher margins. Uchi is committed to growing its bio-tech segment to 50% of group revenue, from 24% currently, within the next three years. We think this is a good diversification strategy but it will be a gradual process as its art-of-living products currently account for 75% of its total revenue.
Dividends the bright spot
We see limited upside potential from the current levels, but maintain our Hold rating due to its decent dividend yield support of 7.2% for FY15, and its net cash position of RM133m. Switch to MPI for better exposure to tech stocks.
Source: CIMB Daybreak - 27 February 2015
