Uchitec has just announced its results for QE30/9/2010. Its net profit increased by 16% q-o-q or 75% y-o-y to RM16 million while its turnover increased by 21% q-o-q or 36% y-o-y to RM30 million. The company explained that the better performance was due to higher sales (obviously!).
Table: Uchitec's last 8 quarterly results
Chart 1: Uchitec's 20 quarterly results
Financial Position
Uchitec's financial position is deemed satisfactory. As at 30/9/2010, its current ratio stood at 13.5 times while its debts to equity is very negligible. The company has FDs totaling RM130 million & Cash in banks totaling RM9 million as at 30/9/2010. This translates to a cash per share of 37 sen!
Valuation
Uchitec (closed at RM1.32 yesterday) is now trading at a trailing PE of 9.7 times (based on last 4 quarters' EPS of 13.56 sen). If the cash reserve is excluded, Uchitec's PE is only 7 times. At this multiple, Uchitec is deemed quite attractive.
Technical Outlook
Uchitec has been consolidating in a triangle, with resistance & support at RM1.40 & RM1.25 respectively. There is no sign that this stock is about to breakout of its current sideway trend.
Chart 2: Uchitec's weekly chart as at Nov 22, 2010 (Source: Quickcharts)
Conclusion
Based on improving financial performance & undemanding valuation, Uchitec can be a good stock for long-term investment. The stock may become a trading buy in the event that it break above the RM1.40 level.
28 comments:
Hi Alex, do you made any study on Tiger ?
Hi Alex, Do u think that YTL land is a good long term investment with the recent corporate alignment ?
hi alex,
how do you see TSM? after it announced its bonus issue, it seems to be on downhill trend.
thanks
maxwealth88
hi Alex, is it normal for construction company to have high total liability/total equity?
Hi Alex, could you take a look at MBMR? It's results this year have been pretty good. After 3 quarters, it's forward PE is about 5 and the current balance sheet looks strong with very little debt. It seems like the stock is due for a re-rating? What's your view of the automotive industry going forward? Thanks!
any news on maybank?
it seems drop alot..
Hi Alex
I'm agree with you, Uchitech earning is coming back after setback from Euro policy change which affect its product sale. Uchitech now have modified its product in order to comply energy saving rules and regain order from coffee marker. Based on 75% payout, and FY 2010 EPS 14.6sen, total dividend should be around 11sen (expect: 5sen TE interim + 6 sen TE final), giving yield of more than 8% nett.
Hi Alex,
For EAH, if the price b4 ex-date is 0.63, can I say that its price would be 0.61 immediately after ex. Calculation for deducting 0.02-->0.63-0.59=0.04/2=0.02 for the 1:2 warrant entitlement, 0.59 being the warrant exercise price.
Appreciate your feedback. Many thanks.
Hi Cheer
I have not studied Tiger any further. This is a very busy period with loads of results announcement.
Hi Stanley,
Except for the Sentosa Cove land, many of the plots of land that YTLLand are acquiring are fairly small. Instead of viewing it as a realignment of business within the YTLGroup, I would view it as a housekeeping exercise which may or may not benefit YTLLand.
Hi MaxWealth88
TSM is correcting after a decent run-up. It may test its 20-week SMA line at RM3.40-3.50.
Hi Bond
Regarding your question of construction company having high total liability/total equity, I would say that it is a fairly common practice. The reason is simple- do you want a construction company of RM100 million paid-up capital to have an order book of RM100 million? If so, this would yield a profit of RM8-10 million (based on profit margin of 8-10%). This is unacceptable to investors & this would lead to the management securing more contracts. These contracts need working capital, hence debts financing.
Hi AlexP
MBMR's results for QE30/9/2010 was a bit disappointing. Its net profit dropped from RM52 mil to RM42 mil q-o-q while turnover dropped from RM405 mil to RM388 mil.
The stock is still in an uptrend. Depending on how the uptrend line is drawn, its support could be at RM2.95 or RM2.75. I think MBMR is a buy if it can rebound after testing its uptrend line- especially the 2nd uptrend line support of RM2.75.
Hi kenny
I did not hear anything that might explain Maybank's current drop. As such, I am inclined to think that it is a simple correction for a stock that has a tremendous run-up. It should be able to find good support at RM8.50.
Hi hng
Thanks for sharing your thoughts on Uchitech.
Hi surewin1woh
If EAH's price on the last cum-date (or, as you out it "b4 ex-date") is 0.63, then the adjusted price (or, the theoretical price after the entitlement) is RM0.42. EAH has proposed a bonus issue of 1-for-2, which means that your cost of owning 2 shares on last cum-date would be 2 x RM0.63. On the ex-date, you should have 3 shares where the 'cost' is computed as follows: (2 x RM0.63)/3
Alex,
Sorry, maybe I didn't make it clear...the bonus is actually 1 free warrant for 2 mother shares. Exercise price fixed at RM0.59, hence my calculation was based on [(RM0.63-RM0.59)=RM0.04 divide by 2] for the warrant's theoretical price. That's y d mother share sould be adjusted down by RM0.02 to RM0.61. Am I right??
Thanks.
Hi surewin1woh\
My apology for the mistake. Normally, the exchange would not makes any adjustment to the reference price for this type of entitlement. However, the market knows that there is value accruing to this warrant (free or otherwise). What is the value of this free warrant? Since the exercise price is at RM0.56, the warrant can be valued as follows:
Warrant value
= Intrinsic Value + Conversion Premium
Intrinsic Value
= Market Price - Exercise Price
= 0.61-0.56
= 0.05
Conversion Premium can range from 10% to 20% of share price. Assuming 15% of share price, the premium would be 0.09.
As such, the warrant would be worth about RM0.14.
Based on this, we can estimate an adjustment in the price of EAH on the first week after the cum-date of the entitlement to be RM0.54. This is arrived at as follows:
= [(Cost of 2 shares) - (Value of warrant)] divided by 2
= [(2 x 0.61) - 0.14]/2
= 0.54
Please note that the share price would adjust back to the price cum-entitlement after a period of 1-3 week(s).
For terms of the EAH's new warrants. go here .
Hi Alex,
Sunway.. why its price stagnant (currently @ 2.29) and not moving towards its merger's offer price @ 2.60?
Opinions pls.
Thanks.
Hi Alex,
Can you advise please.
From past few quaters, can we say that Muhibah is back to the right track? It was reported that EPF had sold their shares and overseas project not making good profit.
Thank you
AL
Hi Alex,
Can you share your view the propect of QL.
This company gain substantial run up for some time. Is that already overprice or her momentum will continue?
Thanks
Good day Alex,
Thanks for your reply.
Cheers,
Hi Alex [AL]
Muhibah reported decent results for the past 2 quarters- QE30/92010 & QE30/6/2010. Its net profit was RM8.6 mil & RM10.8 mil respectively.
Chartwise, Muhibah seems to have bottomed out & commenced on its upleg. It could be a good BUY on pullback to RM1.10-1.20.
Hi Alex [AL]
I agree that QL has risen a lot, from a low of less than RM1.70 in Oct 2008 to a recent high of nearly RM6.00 last month. Based on this sharp run-up, one should be very careful. There are signs of profit-taking as reflected by the sharp swing in the share price over the past 3-4 weeks. A good level to get into the stock is the 20-week SMA line at RM5.00.
PS. Hi Alex [AL], Can you sign in with a different name (or Alex with your last name or a prefix) instead of just plain Alex? I mistook your comment/query as one of my reply.
Hi TheOne
Two reasons why Sunway's price has stagnant (or corrected somewhat) and not moving towards its merger's offer price @ 2.60. They are:
1. The usual practice of selling on news & buying on rumors.
2. You cannot look at offer price alone. You must also consider how the transaction is to be settled. If it is a cash settlement, then the share price may move towards the offer price. However, the settlement is largely by way of new shares from the Newco. The Newco is in turn an amalgam of Sunway & Suncity. So, if the share price of Sunway & Suncity have run up ahead of the news, there is no reason to go up any more. An analogy might be helpful here. Think of exchanging your shirt & pants for a coverall (which is made from the same short & pants). How you price the shirt, pants & coverall are not very important. You will be getting a smaller share of a larger article in exchange for a bigger share of a tinier article.
Dear Alex,
What is your view on Kulim split and bonus issue? Future prospect on this stock?
PPB, current price can consider buy? Any future TP in mind?
Thanks. Good day.
Hi Layman
Kulim is a chariot drawn by three wild horses:
1) Split and bonus issue
2) Appreciation of CPO prices
3) M&A potential for its investment in QSR & indirectly in KFC
In late October to early November, the combined impact from these 3 factors pushed the stock to an all-time high of RM14.20. Can the stock revisit this lofty level? Yes, it is possible since all three "possibles" have yet to happened or ruled out. However, since the share price has run up substantially, a sharp pullback is also a possibility. That may happen if the overall market turned bearish or one or more of the above "possibles" are ruled out (of course the share split & bonus issue are sure things).
One very attractive quality of the business of Uchitech is its very high margin (>50%) and hence its high ROE (>30%?) and ROIC (>50%). It's business also produces high amount of free cash flows because of the low capex requirement. Hence with its green technical problem in European market which seems to have been sorted out, I agree with Alex that Uchitech is a good long term investment. I won't mind paying for a PE of more than 15 for Uchitech.
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