10 Key Things To Know About Uchi Technologies Bhd

In 1981, Ted Kao, a Taiwanese entrepreneur has founded Uchi Electronic Co. Ltd in Taiwan. His brother, Edward Kao soon joined his brother as a partner. Together, the Kao brothers design a control module for electronic bathroom scales for Krups, their first customer.

In 1989, the Kao brothers had decided to set up Uchi’s manufacturing base in Georgetown, Penang. Subsequently, in 1995, Uchi has ended its operations in Taiwan and has relocated their manufacturing base from Georgetown to Prai Industrial Estate, Penang in 1996.

In 1999, Uchi was converted into a public limited company and was listed on Bursa Malaysia under its present name, Uchi Technologies Bhd. Today, Uchi is worth RM 1.22 billion in market capitalization. In this article, I’ll list down 10 quick things that you need to know about Uchi before you invest.

#1: Stock Symbol

Ticker Symbol: KLSE: UCHITEC / KLSE: 7100
Market Capitalization: RM 1.22 Billion (1 May 2018)

Share Price: RM 2.72 (1 May 2018)

Industry: Industrial Products

Syariah Compliant: Yes

#2: The Business

Uchi is into Original Design Manufacturing (ODM). It designs, develops and manufactures electronic control systems which are exported to multinational companies for further assembly into their finished products. For instance, the products include fully automated coffee machines, precision weighing scales, centrifuges, pipettes, and deep freezers.

Uchi has three subsidiaries. Uchi Optoelectronic (M) Sdn Bhd (UOM) is the Uchi’s research & development (R&D) and manufacturing arm that operates Uchi’s manufacturing base in Prai. Meanwhile, Uchi Electronic (M) Sdn Bhd (UEM) and Uchi Technologies (Dongguan) Co. Ltd (Uchi DG) are set up as the assembly arm for Uchi. UEM operates in Prai while Uchi DG operates in Dongguan City, China.

Uchi’s products are mainly exported to Switzerland, Portugal and Germany. The three countries had accounted for 46%, 37% and 12% of Uchi’s revenues in 2017 respectively.

#3: Profitability

Uchi has achieved consistent growth in both revenues and earnings over the last 5 years. Revenues have grown from RM 94.0 million in 2013 to RM 136.6 million in 2017. With slight improvements in profit margins, Uchi’s earnings had grown from RM 39.1 million in 2013 to RM 70.5 million in 2017. During the 5-year period, Uchi has made a 5-Year Return on Equity (ROE) Average of 22.90%. This means, Uchi has generated, on average, RM 22.90 in earnings from every RM 100.00 in shareholders’ equity from 2013 to 2017.

Source: Annual Reports of Uchi Technologies Bhd

Calculated from Figures Obtained from Uchi’s Annual Reports

#4: Balance Sheet Strength

As at 31 December 2017, Uchi does not have any interest-bearing debts, thus, having zero in gearing ratio. Uchi has increased its cash reserves over the last 5 years. It grew from RM 112.0 million in 2013 to RM 243.1 million in 2017.

Source: Annual Reports of Uchi Technologies Bhd

#5: Efficiency Ratio  

There are three efficiency ratios:

  1. Debtor Days
    Uchi has a 5-Year Debtor Day Average of 30.1 days. It means Uchi has taken 30.1 days to collect cash from customers after billing them.
  2. Inventories Days
    Uchi has a 5-Year Inventory Day Average of 124.2 days. This means Uchi has taken an average of 124.2 days to clear off its inventories once it has received its raw materials after purchasing them from its suppliers.
  3. Creditor Days
    Uchi has a 5-Year Creditor Day Average of 219.9 days. This means it indicates that Uchi has taken an average of 219.9 days to pay its bills once being billed by its suppliers.


Calculated from Figures Obtained from Uchi’s Annual Reports

#6: Future Outlook

Here are the key highlights of Uchi moving forward:

Pioneer Status Obtained from MIDA on 2 October 2017
The Malaysian Investment Development Authority (MIDA) has granted the approval to Uchi for the pioneer status of design, development and as well as the manufacturing of real-time centralised energy measurement and control systems, high precision hot fluid temperature control systems, and ultra-low temperature and mass sensing control systems for biochemical equipment.

The pioneer status allows Uchi to enjoy 100% tax-free income derived from the above products for 5 years starting from the date of their production. The date is to be determined in the near future.

CAPEX Allocation 2018

Uchi has budgeted RM 10 million on capital expenditures for 2018. It would be utilized for upgrading and enhancement of its facilities.

#7: Major Risk

In 2017, Uchi has derived RM 106.7 million or 78.1% from a major customer. Thus, Uchi’s future financial results would be greatly dependent on the level of orders from this customer, thus, is prone to customer concentration risk.  

#8: Valuation

As I write, Uchi is trading at RM 2.72 a share.

In 2017, Uchi has reported earnings per share (EPS) of 16.1 sen. Hence, its current P/E Ratio works out to be 16.89. In 2017, Uchi has reported having RM 0.539 in net assets a share. Hence, it has a current P/B Ratio of 5.05.  

Uchi has declared 17.0 sen in dividends per share (DPS) in 2017. If it is able to maintain its DPS at 17.0 sen, its expected gross dividend yields work out to be 6.25% if I invest in Uchi at RM 2.72 a share.


#9: Investors Relation

For further enquiries or to request for additional investment information on Uchi Technologies Bhd’s Investors Relation matters, you may contact:

 

Website: https://www.uchi.net/investor-relations

Ms. Jaclyn Tan

Designation: Assistant Treasury Manager

Email: jaclyn.tan@uo.uchi.net

Contact No.: +604 399 0035 extension 3302


#10: Major Shareholders

As at 4 April 2018, the substantial shareholders of Uchi Technologies Bhd and their respective shareholdings are as followed:

– Eastbow International Ltd: 18.62%

– Ironbridge Worldwide Ltd: 7.90%

– Public Islamic Opportunities Fund: 3.59%

– Asia Oceania Dividend Yield Stock Mother Fund: 2.74%

– Bekal Sama Sdn Bhd: 2.23%

Note:

Ted Kao is the major shareholder of Uchi Technologies Bhd with his interest in Eastbow International Ltd. Ted is the Managing Director of the company.

Edward Kao is the second largest shareholder of Uchi Technologies Bhd with his interest in Ironbridge Worldwide Ltd. Edward is the Executive Director of the company.

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Ian Tai

Ian Tai is the founder of Bursaking.com.my, a platform that empowers retail investors to build wealth through ownership of fundamentally solid stocks. It is an essential tool that sifts out stocks that grow profits consistently from a database of over 900+ stocks listed mainly in Malaysia. As a Malaysian with close family ties in Singapore, Ian publishes a series of newsletters on how anyone can invest profitability in both countries.

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