THE ONLY TOP PICK AND RECESSION-PROOF STOCK, TOO HARD TO IGNORE!

Hi, 
 

The tech stocks and the oil plays are so beaten-up even as positive long-term outlook for the sectors is still intact. If you own the oils or the techs, it's hard not to feel like an idiot. There's no catalyst in the near-term or medium-term future to change this.

Right now, the market is making the call to shed these stocks because with commodity risk, a potentially slowing economy and concerns around the yield curve. So, even though the stocks are cheap considering their fundamental strength, this couldn't tell investors to buy them now for fear of them being unable to make a quick comeback.

What is still the best one in this current market and beyond this, is UCREST due to its recession-proof characteristic following tied to healthcare industry and its exponential growth potential. It should be a screaming BUY here.

The company provides cloud system, called i-medic Cloud for healthcare industry. This is a fantastic stock, and it's got, by the way, the best technology when it comes to online healthcare, which could be disruption to traditional healthcare ecosystem. Nobody stop going to hospital!!!

It is really good, good software. This is business proces that I do like it. Now, remember, this stock will have big moves and I'm not giving up on this stock for at least the next 3 years.

The system enables patients anywhere in the country to record and monitor their vital signs, such as blood pressure, blood glucose level, blood oxygen, body temperature, bone density, body mass index (BMI) and even perform an electrocardiogram (ECG) at home via wireless medical devices. Data from these devices are transmitted to a cloud network and doctors would be able to access and analyse the data via the Internet from wherever they are at any time.

This would enable doctors to provide remote consultation services to patients anywhere in the country, which would be paid for by the government. Patients need not go to government hospitals for regular check-ups. They can take their own readings using wireless medical devices and the data is sent to the cloud network where they can be monitored by the doctors at any time. In addition, because the patient tracks his own readings on the cloud network, he would receive positive reinforcement from improvement in the readings.

This is in contrast to Ping Ann Good Doctor that is just a mobile app, which only provides free diagnosis, treatment and online appointment booking. That is why Ping Ann is still loss making while UCREST has been making money and more will be coming even though it was just launched the system two years ago.

Its revenue is largely driven by following country: 

85% - Russia,

10% - China,

5% - Singapore, etc

UCREST would generate revenue from the following three areas for:

i) setting up a cloud network system; 

ii) selling wireless medical devices;

iii) annual patient subscription charges for usage of its MHCN services.
 
It has secured more than 200,000 user licenses of its i-Medic Cloud on more than 10 hospitals it has secured so far since its launched.  As a result, its FY18 profit turned around to RM14.2m from a loss of RM0.8m in FY17.
The key revenues are derived from (ii) and (iii), which become a large base and recurring. Meanwhile, revenue from (i) will come in when there is a new hospital. That was why no COGS in its recent 1Q19 results. They still can grow and receive recurring income by number of user licenses though. Look at its 1Q profit alone, without revenue from (i) and no COGS, its profit sustain at RM4.9m.
Can you imagine if UCREST double its user licenses of its i-Medic Cloud PLUS new hospital in current FY19 and onwards, its profitability could be enormous potentially. The key catalysts would be as follow:

1. During a CIMB retail research roadshow with UCREST recently, UCREST had highlighted that there are more 10,000 hospitals in Russia that they can tap into and secure more on top of what they have now, which would help them to increase number of user licenses to boost its profit. 
   

Why Russia is so important? Russia is the largest country in the world, spanning 6.6m square miles. According to data from the Organisation for Economic Co-operation and Development (OECD), the number of doctors per 10,000 people in Russian cities is 43.8 doctors, but this drops to only 12.1 doctors in the rural areas. Furthermore, around 17,500 towns in rural areas of Russia have no access to medical services. According to the US Central Intelligence Agency (CIA) World Factbook, Russia’s internet penetration rate was around 76.4% as at Jul 2016

1. They are also looking to expand further its China market. Most of its revenue currently comes from self-paid patients for private hospital. Additionally, they have been marketing its Cloud system in Turkey and met up with Ministry of Turkey as they are looking to penetrate into this market.
   
2. Another breakthrough by the Company is they have a secured a contract to install i-Medic Cloud platform for a pharmaceutical company in Malaysia. The contribution is expected to start early next year. This has moved up its value chain and would help to increase further number of user licenses. 
   

 

UCREST's valuation remains cheap and cheaper against other stocks that are not recession-prooft and against healthcare stocks. 

It has traded at only 5.7x P/E over its annualised FY19 EPS of 4.28sen (this is conservative). What if UCREST manage to double number of licenses, you know the answer better! 

Historically, UCREST has traded below its historical P/E of 13x. Still safe a bet. Both IHH and KPJ have traded more than 40x and 20x!

If I assume only additional 100,000 on top of 200,00 user licenses (in total 300,000), it could probably translate into FY19 earnings of RM24.7m or EPS of 5.2sen. By pegging it to 13x PER, UCREST would be fairly valued at 68sen!!!

 

This is neither a recommendation nor promoting or cornering the stock. This is just my opinion!

https://klse.i3investor.com/blogs/winners/186808.jsp