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A 5-Minutes Guide to Uchi Technologies (KLSE:UCHITEC)

If you haven’t yet noticed, we have embedded a survey form to show at the right bottom screen whenever you come to our site. In it, readers can choose a company that they are interested in knowing more and we will try to cover it if possible.

One of our readers has requested for us to do a writeup on Uchi Technologies (KLSE:UCHITEC) which has just released its latest earnings report on 31 Dec 2016.

Without further ado, we will zoom in straightaway to this company’s fundamentals.

What does the company do?

Uchi Tech is a Malaysia-based company which deals with the designing, manufacturing and development of mixed signal microprocessor based application, electronic modules and system integration products. It also engages in the assembling of electrical components onto printed circuit boards and trading of complete electric module.

The company derived a large portion of its revenue from the European market and it has a market capitalisation of MYR 782 million.

Financial Health of the Company

The year of 2015 seems to be a strong period for Ubi Tech which saw a 18% increase in its revenue and a 23% growth in its net income. However, in year 2016, its latest earnings reported a smaller increase of 7.36% and 12.6% growth in terms of its revenue and net income respectively.

According to its announcement, its Executive Director Edward Kao Te-Pei had already indicated that the group expects a subdued sales forecast for 2016 due to a slow down in global demand for consumer products.

In terms of its ability to pay high dividends, the company’s pool of cash and short-term investment has seen a 15% increase from 2015. Their business operating cashflow stands at MYR 61 million which translate to a whooping 20.6% increase from 2015. Therefore, the company should not face any issue in paying out its dividend of 11 cents in the upcoming year.

One thing worth noting is that the company’s capital expenditures in 2016 has amounted close to MYR 3 million due to heavy purchases of fixed assets. This can be seen as an indication that the company is planning to undertake new projects and to increase the scope of their operations.

To add on to their growth potential, its current ratio has been consistently high over the past 5 years. It last stood at 4.50, which leaves the company a lot of room for future investments and growth. Its retained earnings pool is also in the healthy zone, with a recent increase of 11.7% to MYR 114 million.

Final Verdict

Uchi Tech is a fundamentally strong company which registered a high dividend yield of 6.15%. It is definitely good to maintain its shares over the long term to chase after its high dividend payout. However, in terms of tapping on its capital appreciation to make profits, the company do have the potential for growth but in lieu of the slowdown in global demand for consumer products, it is best to keep a lookout on any significant move from the company before making a decision.

Uchi Tech last closed at a price of MYR 1.79 and has a P/E ratio of 14.3.

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