Thursday, September 04, 2008

Uchitec to benefit from a weakened RM

Uchitec has recently announced its results for 2Q2008 ended 30/6/2008. Its net profit dropped 11.7% q-o-q or 24.2% y-o-y to RM16.4 million, while its turnover declined 8.9% q-o-q or 16.5% y-o-y to RM33.5 million. The financial performance of Uchitec has been impacted significantly by the appreciation of the RM, while its revenue (denoted in US Dollar) is pretty much intact. From the first table below, we can see that its turnover in US Dollar dropped by a mere 4.2% y-o-y in 1H2008, while in RM term, the decline was 11.1%. There is a good prospect that the present depreciation in the RM would be very positive for Uchitec.

Technically speaking, Uchitec is still in a downtrend. There may be some support at the RM1.15-35 level, but this support level is not very strong.

Chart: Uchitec's monthly chart as at September 3rd, 2008 (source: Quickcharts)

Based on the potential improvement in its financial performance, Uchitec is a stock worth tracking closely. Those with a contrarian approach may choose to slowly accumulate this stock, especially if the RM1.15-35 support level can hold.


MaxWealth88 said...

i have been following uchitec quite closely lately. do you think there are any fundamental changes that is causing its shares to fall?

Unknown said...

Uchi announced in it's latest quarterly report that earnings for the 2nd half of 2008 will be soft as it's biggest customer in Switzerland is deferring purchases until design of new energy saving coffeemakers are completed. Still.. even with this news, Uchi is greatly oversold. It can and will likely maintain it's 20 cents dividend per annum, making it one of the best dividend yielding stocks in Bursa.

MaxWealth88 said...

thanks for your reply. sometimes i dont understand why good companies are being sold down.

Unknown said...

because of FEAR..and in Uchitec's case; a lack of liquidity. As you can see from it's daily volume, very little money is required to push this stock up and down. Expect a swift recovery if Uchi confirms that it's yearly December dividend payout of 10 cents is intact

Alex Lu said...

Hi guys,

I see an interesting discussion here. I like to add that the drop in Uchitec's share price in the past 1 year can be traced to fundamental reason (such as flattish turnover & net profit initially, then falling turnover & net profit when the Ringgit strengthened). This is also confirmed by technical analysis (as per my post dated Nov 21st, last year).

The drop in the share price has been very excessive (nearly 80% of the gain from its low of about RM0.80 to its high of RM3.40). At this stage, the selling momentum takes a life of its own & it could push the price much lower than its fair value. If one has a long investment horizon & a contrarian approach, one can consider slowly buying into this stock now. An investor, who based his entry using technical approach, would "avoid catching a falling knife" & wait for a reversal.