Uchitec's bottom-line dragged down by forex losses

Uchitec has just announced its results for 1Q2009, where its net profit dropped by 75% q-o-q or 85% y-o-y to RM2.8 million while turnover dropped 30% q-o-q or 51% y-o-y to RM18.1 million. The drop in turnover was attributable to the global economic slowdown as well as ts customer's logistic restructuring (stemming from European energy-saving directive that will take effect from January 1, 2010).

Uchitec's profitability was affected by the lower turnover as well as recognition of forex losses of RM6.0 million. Part of this forex losses includes unrealized forex losses of RM4.2 million which arose from certain open contract with a bank. That contract has been terminated in April 2009 & the full amount of the realized forex losses of RM8.9 million has been recognized in April 2009. Thus, we can expect a further forex losses item of RM4.7 million to be charged off in the next quarter results (i.e. 2Q2009).

With the knowledge of this forex losses & little visibility of a quick improvement in Uchitec's business, I believe its next quarter's result will be about the same as 1Q2009.



Uchitec's share price has been in a downtrend since making a high of RM3.42 in June 2007. It has finally broken above that downtrend line at RM1.25 level last month. A tentative short-term uptrend line with support at RM1.15 can be plotted. On weakness, I expect the RM1.10-15 level may provide good support for this stock.


Chart: Uchitec's daily chart as at 15/5/2009 (Source: Quickcharts)

Despite the projected poor performance in the next quarter, Uchitec is a stock to watch since its technical outlook has turned positive.