Since our initial coverage of UWC back on 4 January 2021, UWC’s share price has increased by about 18% from RM4.90 to RM5.80 (adjusted for bonus issue) as of 5 March 2021.
In this article, we provide an update on UWC’s latest financial results (2Q2021) and our opinion of its prospects forward.
UPDATE ON LATEST QUARTER (NOV – JAN) RESULTS
Compared to 1Q2021, UWC’s revenue increased by RM6.3m / 8.8% to RM77.8m in 2Q2021. The increase was contributed by sustained demand from its customers across the semiconductor and medical segment.
Ever since venturing into the COVID-19 test equipment supply chain, the Group receives strong demand and is expanding rapidly within the medical segment.
In 2Q2021, UWC’s PAT exceeded our expectation with a significant 25.5% increase as compared to the previous quarter. The better margin was a result of improved manufacturing efficiencies (process automation) and better economies of scale.
UPDATE ON 1H2021 (JUN – DEC) RESULTS
As compared to 1H2020, UWC achieved a 46% increase in revenue and an impressive 98% increase in PAT during 1H2021. The strong growth were due to:
- Continued strong demand from its semiconductor clients;
- Larger involvement in the life science and medical technology industry;
- Increased production utilisation; and
- Effective operation and cost management
On its prospects forward, the Group is optimistic to maintain its growth momentum given both the semiconductor and life science industries are expected to keep growing, fuelled by strong global market fundamentals and total addressable market.
CORPORATE UPDATES
Besides completion of the bonus issue of 550.2m shares (1:1 ratio) on 18 February 2021, there were no major news/developments on the Group, since our initial coverage.
VALUATION UPDATES
With reference to UWC’s latest quarter results, we have made slight adjustments to our projections on UWC’s FY2021 full year results, as below.
Revised assumptions:
| Previous | Revised | Reasons |
|---|---|---|
| Revenue growth rate assumed between 30% – 40%. | Revenue growth rate assumed at a higher rate of 35% – 45%. | Annualizing UWC’s 1H results would already mean a 35% growth for the year. We expect the following quarters to improve further. |
| GP Margin assumed between 45% – 50%. | GP Margin assumed to improve to a range of 53% – 58%. | Better clarity from the latest quarter result – on improved manufacturing efficiencies and better economies of scale. |
| Operating cost assumed between RM13.5m to RM14.5m. | Operating cost assumed higher at RM32m to RM35m. |
Better clarity from the latest quarter result/ Different classification of expenses in the annual report against the quarter report. |
| Net margin assumed to range between 30.5% – 34.5%. | Net margin assumed to improve to a range of 32% – 36%. | Improved manufacturing efficiencies and better economies of scale. |
At RM5.80, the market is valuing UWC at 61x PE on our base-case assumption that the Group achieves FY2021 full-year net profit of RM104.3m. As of 1H2021, UWC has achieved 46.7% (1H net profit RM48.7m) of our full-year estimate.
In terms of valuation, we opine that UWC is slightly over-priced at its current valuation of 61x PE.
Having said the above, we remain positive and invested in the Group.
According to the Management latest updates, the business is/has:
- Receiving an increasing number of enquiries and orders from existing and new customers based locally and overseas;
- Estimating a strong demand for chip testers and test handler in the coming quarters;
- Successfully moved up the semiconductor value chain by undertaking the manufacturing of front-end semiconductor equipment, automated test equipment, and 5G test equipment;
- To commence mass production of autonomous vehicle reliability chip testers in 2H2021;
- Completed the construction of the class 10k cleanroom in early February. They are ready to cater to front-end semiconductor equipment high-level assembly; and
- Striving for sustainable development in the life science industry as they secure recurring orders, while on the lookout for new customers.
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https://klse.i3investor.com/blogs/The1994Investor/2021-03-07-story-h1542062628-UWC_Impressive_growth_momentum_continues.jsp
