Disclaimer: Please seek advice from your respective dealer or remisier or do your own research for decision making. Whatever note written after this or forecasts below are just for the purpose of sharing the author's opinion. The author will not responsible for any loss/profit you react from it.
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Introduction
UCREST was previously known as Palette Multimedia.
What is so interesting about this company is not its existing loss-making wired and wireless in network Access Management System BUT its new integration service in mobile healthcare Cloud system, i-medic
The Company has moved up value chain of its wireless networking and system software into profit making service by offering new solution, which is i-medic.
The device connects to multiple wireless intelligent medical or healthcare devices to doctors, care takers or hospitals, targeting at helping doctors and specialists to extend their medical services beyond the physical boundaries.
It is not only designed for medical or healthcare application, it can also be customized to be used for taking care of senior citizens either at home or at old folks homes.
In other words, this would allow doctors from anywhere in the world to have access to the patient's data 24x7 to review and provide online consultation to the patients.
With i-medic system, doctors or specialists can scale up their business, providing services beyond their existing physical perimeter. It is also very useful for doctors to continue monitoring of patients, providing them with step down care after they are discharged from the hospital.
The contribution from this service has started in its 4QFY17, which significant helped with small profit to turnaround from loss last year and prior quarter.
It did not stop there, UCREST sequentially recorded earnings in 1QFY18, contributing from strong sales in Russia alone.
The Company's earnings made a HUGE JUMP of more than 3-fold from 4QFY17 and exceeded 4-fold against corresponding period last year.
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Optional to read: About i-medic
i-medic is capable of connecting to multiple medical, healthcare, fitness and even tracking devices, with mobile APP running on smart phones or tablets, allowing users or patients to have their vital signs such as blood pressure, blood oxygen, body temperature, bone density, BMI, blood glucose, etc. to be taken and uploaded to the Cloud immediately at any time, from any place. Providing the diagnostic or consultation from a distance globally, doctors, specialists or care takers will be able to break the traditional model where medical services are limited by the physical perimeter.
Based on the existing IPs that it has developed over the years and newly developed intelligent IPs including the mobile APP IP, it has developed the most robust, intuitive and intelligent mobile medical Cloud.
Supporting IEEE 11073 standard interface for medical devices, i-medic is capable of connecting to multiple medical, healthcare, fitness and even tracking devices, with mobile APP running on smart phones or tablets, allowing users or patients to have their vital signs such as blood pressure, blood oxygen, body temperature, bone density, BMI, blood glucose, etc. to be taken and uploaded to the Cloud immediately at any time, from any place.
Providing the diagnostic or consultation from a distance globally, doctors, specialists or care takers will be able to break the traditional model where medical services are limited by the physical perimeter.
In addition to the connectivity between patients and doctors, i-medic has
intelligent analytic that can assist doctors in their diagnosis,
increasing the accuracy of the diagnosis as well as improving the
efficiency of the doctors. It has a very robust and personalized
Electronic Medical Record (EMR) that will track every piece of data of a
user or patient for years even after life.
i-medic is
ideal for management of health condition of patients with chronic
diseases such as hypertension, diabetes, heart disease, obesity and
weight management. i-medic system
for heart disease management and monitoring comes with a highly
sensitive sensing device that is capable of measuring heart rate,
systolic, diastolic, a total of 26 parameters associated with the heart.
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Growth strategy for i-medicThere’s a "long way to go." They just started operate this segment and as the contribution is now only comes from Russia, it means that there is a vast potential in its both sales and net profit in the coming years from penetration into new markets besides Russia.
Meanwhile, mobile healthcare market was expected to hit USD26 billion in 2017 according to some of the market study, and they expect the market in Malaysia to grow over the next few years. Since it is a Cloud based technology, the accessible market for them is the anywhere in the world.
i-medic system now supports both English and Simplified Chinese language, and they expect to add other languages as the needs arise. Their market is clear, i.e. China in addition to the many English speaking countries.
Speaking about China market, it is A LOT A LOT BIGGER than Russia.
For FY18, the Company expects revenue to surge by 8 to 10 times, boosted by orders from Russia.
The
Company has been contracted to help build a national cloud network for
Russia’s public hospital system; network to help Russia government to
save costs and lighten burden on nation’s healthcare system. Current contract is to provide equipment for cloud network for 20 hospitals; Russia has about 20,000 healthcare facilities.
UCREST is also working with other companies to expand into other republics, without naming them.
Current order book worth about RM30 million come from units of Russia Telecom Equipment Co, part of Russia’s state-owned Rostec.
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ForecastIf we were to work out on its net profit, we can grossly estimate it from its revenue that has already been guided by the Company.
With current orderbook and new orders would be secured this year, it is expected to generate 8-10 times higher than FY17 revenue. This would result in its revenue to grow to RM51.4 million in FY18.
Bottom line, using the same 1QFY18 net profit margin of 38.6% would result in its FY18 net profit of RM19.9 million. Its FY18 EPS would be at an estimated of 6.2sen per share.
As UCREST has been trading around 11.3 to 12.6 times trailing PER, we peg this PER to an estimated FY18 EPS of 6.2. On this basis, we get its estimated fair value of around 70 to 78sen.
The Company is expected to announce its 2QFY18 results BEFORE FRIDAY (26th January) NEXT WEEK based on historical pattern of results announcement. Probably between Tuesday and Thursday.
What can we expect in its 2QFY18 results is another skyrocketed earnings again. We will see HUGE TURNAROUND in its earnings as compared to loss in 2Q last year.
As of 1QFY18, its earnings only met 15% of the earnings forecast of RM19.9 million. It means we can expect AT LEAST RM6.9m net profit and the remaining RM9.95 million will be in 2HFY18.
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Conclusion
FY18 earnings growth alone would continue drive the stock higher to another historic level of high from current level of 45sen.
The stock could possibly reach RM1.00 by end of this year to be backed by its strong new potential orders from Russia markets and new markets. This will only can see in its 1QFY19 and onwards results to be announced in October this year.
Penetration into new markets particularly China market, even a slice of it will be a strong boost to the Company's orderbook.
Maybe 2-3 years later, the stock could be worth RM5.00? The excitement in earnings growth for this Company is never ending as there are still a lot more markets they can penetrate into. So, it won't take so long to reach that level of share price as the Company is in healthcare sector and it is an intelligent provider for health monitoring, which it is everyone needs.
So, who cares about Brahmal exit? The fundamental of the Company will derive the share price higher and justifies it.
On technical analysis perspective, it generates STRONG BUY from short-term to long-term. A very good call.
