{"id":6931,"date":"2019-06-20T06:38:30","date_gmt":"2019-06-19T22:38:30","guid":{"rendered":"https:\/\/www.smallcapasia.com\/?p=6931"},"modified":"2019-06-20T07:09:43","modified_gmt":"2019-06-19T23:09:43","slug":"uwc-bhd-ipo","status":"publish","type":"post","link":"https:\/\/www.smallcapasia.com\/zh-hans\/uwc-bhd-ipo\/","title":{"rendered":"UWC IPO: 8 Things to Know about it before Subscribing"},"content":{"rendered":"

UWC IPO has launched on 17 June 2019, offering 70 million new shares to the public and an offer of sale of 33.01 million existing shares at an IPO price of 82 sen per share.<\/span><\/p>\n

Its IPO document can be downloaded here:\u00a0<\/span><\/p>\n\n\n\n\n
UWC Bhd IPO<\/span><\/td>\n\n

Part 1<\/span><\/a><\/p>\n<\/td>\n<\/tr>\n

UWC Bhd IPO<\/span><\/td>\n\n

Part 2<\/span><\/a><\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Upon its listing, UWC will have a market capitalisation of RM300.77mil based on the issue\/offer price of 82 sen and its enlarged share capital of 366.80mil.<\/span><\/p>\n

The application will be closed at 5.00 p.m. on 28 June 2019. <\/span>Its shares would be listed on Bursa Malaysia on 10 July 2019.<\/p>\n

Question: \u2018Should I subscribe to UWC IPO shares?\u2019 <\/span><\/p>\n

Personally, I suggest that you take time to read its IPO document. But, if time is of the essence, here, I have summarized 8 main takeaways on UWC Bhd so that you can decide whether or not you should invest in its shares.<\/span><\/p>\n

#1: Business Model <\/b><\/h2>\n

 <\/p>\n

\"\"<\/a><\/p>\n

Source: Page 71 of UWC Bhd\u2019s IPO <\/span><\/p>\n

UWC Bhd provides precision sheet metal fabrication and value-added assembly services in its new plant measuring 255,364 sq. ft. at Batu Kawan, Penang. They involved cutting, forming, and joining sheet metals and metal blocks into pieces of metal parts and precision components. <\/span><\/p>\n

From it, its end-products could either be delivered to its clients or assembled into machine structures, enclosures and chassis before delivery to its customers.<\/span><\/p>\n

[thrive_lead_lock id=’5359′]<\/p>\n

#2: Geographical Markets <\/b><\/h2>\n

UWC Bhd\u2019s primary market is in Malaysia where it contributed 58.6% of its total revenues in 2018. Its remaining 41.4% of revenues were contributed by exports to Singapore, the United States, France, China and the United Kingdom.<\/span><\/p>\n

 <\/p>\n

\"\"<\/a><\/p>\n

Source: Page 96 of UWC Bhd\u2019s IPO<\/span><\/p>\n

#3: Financial Track Record<\/b><\/h2>\n

For the last 3 years, UWC Bhd has achieved growth in group revenues, up from RM 76.3 million in 2016 to RM 136.5 million in 2018. It is because the company has received higher orders from its main customers. <\/span><\/p>\n

As such, it has contributed to an increase in adjusted profit after tax (PAT) from RM 8.5 million in 2016 to a total of RM 23.2 million in 2018. <\/span><\/p>\n

Figures in RM \u2018000 unless stated otherwise <\/b><\/p>\n\n\n\n\n\n\n\n
Year<\/span><\/td>\n\n

2016<\/span><\/p>\n<\/td>\n

\n

2017<\/span><\/p>\n<\/td>\n

\n

2018<\/span><\/p>\n<\/td>\n<\/tr>\n

Group Revenues<\/span><\/td>\n\n

76,311<\/span><\/p>\n<\/td>\n

\n

92,158<\/span><\/p>\n<\/td>\n

\n

136,495<\/span><\/p>\n<\/td>\n<\/tr>\n

Shareholders\u2019 Earnings<\/span><\/td>\n\n

8,486<\/span><\/p>\n<\/td>\n

\n

11,604<\/span><\/p>\n<\/td>\n

\n

23,213<\/span><\/p>\n<\/td>\n<\/tr>\n

Earnings per Share (Sen)<\/span><\/td>\n\n

2.3<\/span><\/p>\n<\/td>\n

\n

3.2<\/span><\/p>\n<\/td>\n

\n

6.3<\/span><\/p>\n<\/td>\n<\/tr>\n

Return on Equity (%)<\/span><\/td>\n\n

13.52%<\/span><\/p>\n<\/td>\n

\n

15.59%<\/span><\/p>\n<\/td>\n

\n

27.58%<\/span><\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Source: Page 11 and 141 of UWC Bhd\u2019s IPO<\/span><\/p>\n

Read also: 3 Small Cap Stocks with Consistent Dividends over last 5 Years<\/a><\/span><\/p>\n

#4: Balance Sheet Strength <\/b><\/h2>\n

As of 31 January 2019, UWC Bhd has total borrowings of RM 49.15 million and RM 101.51 million in shareholders\u2019 equity. Thus, it has a gearing ratio of 48.4%. <\/span><\/p>\n

In addition, it has current assets of RM 86.26 million and current liabilities of a total of RM 40.62 million. Thus, it has a current ratio of 2.12. <\/span><\/p>\n\n\n\n\n\n
Year<\/span><\/td>\n\n

2016<\/span><\/p>\n<\/td>\n

\n

2017<\/span><\/p>\n<\/td>\n

\n

2018<\/span><\/p>\n<\/td>\n

\n

31 Jan 2019<\/span><\/p>\n<\/td>\n<\/tr>\n

Current Ratio<\/span><\/td>\n\n

2.04<\/span><\/p>\n<\/td>\n

\n

1.65<\/span><\/p>\n<\/td>\n

\n

1.72<\/span><\/p>\n<\/td>\n

\n

2.12<\/span><\/p>\n<\/td>\n<\/tr>\n

Gearing Ratio (%)<\/span><\/td>\n\n

23.34%<\/span><\/p>\n<\/td>\n

\n

33.52%<\/span><\/p>\n<\/td>\n

\n

60.99%<\/span><\/p>\n<\/td>\n

\n

48.41%<\/span><\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Calculated from Data Sourced from UWC Bhd\u2019s IPO<\/span><\/p>\n

#5: IPO Proceeds <\/b><\/h2>\n

\"\"<\/a><\/p>\n

Source: Page 22 of UWC Bhd\u2019s IPO <\/span><\/p>\n

UWC Bhd intends to raise RM 57.40 million in gross proceeds. Out of which, the company plans to use it in the following: <\/span><\/p>\n

1. Purchase of CNC Machines: RM 27.42 million <\/b><\/p>\n

Presently, UWC Bhd has 166 units of CNC Machines. It intends to acquire a total of 29 units of CNC Machines, lifting its number of CNC Machines to 195 and will increase its fabrication and machining capacity by 18.6%.<\/span><\/p>\n

\"\"<\/a><\/p>\n

Source: Page 23 of UWC Bhd\u2019s IPO <\/span><\/p>\n

2. Purchase of Industrial Robotic Arms & Material Handling System: RM 4.70 million <\/b><\/p>\n

UWC Bhd plans to acquire 18 industrial robotic arms and one material handling system to further automate its manufacturing processes, which in turn, reduces its dependency on human labour and production costs. This allows UWC Bhd to enjoy approximately RM 0.9 million in cost savings a year as a result of reduced labour costs in the immediate future. <\/span><\/p>\n

3. Repayment of Bank Borrowings: RM 18.00 million<\/b>
\n<\/span><\/p>\n

UWC Bhd has obtained term loans from Public Bank Bhd and Hong Leong Bank Bhd at interest rates of 4.52% and 4.85% per annum respectively. By repaying a total of RM 18.00 million in term loans, UWC Bhd expects to enjoy interest cost savings of RM 0.8 million per annum. <\/span><\/p>\n

4. Working Capital: RM 2.87 million<\/b><\/p>\n

UWC Bhd budgets RM 2.87 million in working capital, reserve for the purchase of raw materials such as sheet metals, metal blocks, parts and components. <\/span><\/p>\n

5. Listing Expenses: RM 4.42 million<\/b><\/p>\n

 <\/p>\n

#6: Management <\/b><\/h2>\n

The following is a list of major shareholders of UWC Bhd upon listing: <\/span><\/p>\n\n\n\n\n\n\n
\n

No.<\/span><\/p>\n<\/td>\n

Main Shareholders<\/span><\/td>\n\n

Shareholdings (%)<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

1<\/span><\/p>\n<\/td>\n

UWC Capital<\/span><\/td>\n\n

52.6%<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

2<\/span><\/p>\n<\/td>\n

Dato\u2019 Ng Chai Eng (Dato\u2019 Ng)<\/span><\/td>\n\n

9.1%<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

3<\/span><\/p>\n<\/td>\n

Lau Chee Kheong (Lau)<\/span><\/td>\n\n

9.1%<\/span><\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Source: Page 32 of UWC Bhd\u2019s IPO <\/span><\/p>\n

Both Dato\u2019 Ng and Lau are major shareholders of UWC Bhd through their direct shareholdings in UWC Bhd and majority interests in UWC Capital. <\/span><\/p>\n

Dato\u2019 Ng is appointed as UWC Bhd\u2019s Executive Director & Group CEO. Lau sits in the board as Executive Director & Group COO. Ng Chee Liang, son of Dato\u2019 Ng is the Head of Corporate Affairs and Communication. Ng Sze Yan, who is the niece of Dato\u2019 Ng is UWC Bhd\u2019s Head of Operations.<\/span><\/p>\n

#7: Major Risk<\/b><\/h2>\n

UWC Bhd is subjected to concentration risk as it derived 80.4% of its revenue in 2018 from 5 key customers. Hence, its future financial results are dependent on them. They include:<\/span><\/p>\n

\"\"<\/a><\/p>\n

Source: Page 106 of UWC Bhd\u2019s IPO <\/span><\/p>\n

#8: Valuation <\/b><\/h2>\n

At current offer of RM 0.82 per share, UWC Bhd\u2019s IPO shares are offered at P\/E Ratio of 13.02 and P\/B Ratio of 2.96 (based on net assets of 27.7 sen).<\/span><\/p>\n

The company intends to adopt a dividend policy of a minimum of 20% of profit after tax (PAT). In 2018, it made 6.3 sen in adjusted EPS. Thus, it would pay out a minimum of 1.26 sen in dividends per share (DPS), offering a dividend yield of 1.54% per annum.<\/span><\/p>\n

[\/thrive_lead_lock]<\/p>\n

Conclusion: <\/b><\/h2>\n

Overall, UWC Bhd has recorded improvements in financial results for the past 3 years. However, it remains highly dependent on 5 key customers for its financial results in the future. <\/span><\/p>\n

So, the question remains: \u2018Should I subscribe to UWC Bhd\u2019s IPO shares?\u2019 <\/span><\/p>\n

You decide.<\/span><\/p>\n

 <\/p>\n

\n

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 <\/p>\n","protected":false},"excerpt":{"rendered":"

UWC IPO has launched on 17 June 2019, offering 70 million new shares to the public and an offer of sale of 33.01 million existing shares at an IPO price of 82 sen per share. Its IPO document can be downloaded here:\u00a0 UWC Bhd IPO Part 1 UWC Bhd IPO Part 2 Upon its listing, […]<\/p>\n","protected":false},"author":1,"featured_media":6960,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"fifu_image_url":"","fifu_image_alt":"","footnotes":""},"categories":[1,60],"tags":[851,852,853,854],"class_list":["post-6931","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-blog","category-malaysia-stocks","tag-uwc-ipo","tag-uwc-bhd-ipo","tag-uwc-berhad","tag-uwc"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.smallcapasia.com\/zh-hans\/wp-json\/wp\/v2\/posts\/6931","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.smallcapasia.com\/zh-hans\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.smallcapasia.com\/zh-hans\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.smallcapasia.com\/zh-hans\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.smallcapasia.com\/zh-hans\/wp-json\/wp\/v2\/comments?post=6931"}],"version-history":[{"count":0,"href":"https:\/\/www.smallcapasia.com\/zh-hans\/wp-json\/wp\/v2\/posts\/6931\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.smallcapasia.com\/zh-hans\/wp-json\/wp\/v2\/media\/6960"}],"wp:attachment":[{"href":"https:\/\/www.smallcapasia.com\/zh-hans\/wp-json\/wp\/v2\/media?parent=6931"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.smallcapasia.com\/zh-hans\/wp-json\/wp\/v2\/categories?post=6931"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.smallcapasia.com\/zh-hans\/wp-json\/wp\/v2\/tags?post=6931"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}