UCHITEC (7100) - UCHITEC - U SEE THAT II *VALUECAP*

UCHITEC had released their Annual Report on 19 April 2016. Indeed there are surprises in the Top 30 Shareholders. This post will be an additional to the previous UCHITEC post. The theme of the Annual Report 2015 "Flourishing from Strength to Strength" with pictures of ripe and ready to harvest paddy. Maybe the management is hinting the share price is going to turn to goldish yellow~ haha. Let's dig in~

1. Fundamental Analysis:

Revenue and Net Profit for UCHITEC from 2011 to 2015

The best part about UCHITEC is its revenue and net profit is consistently high. The average of net profit margin and EPS of 44.66% and 11.94 cents respectively for 5 years. The dividend yield for UCHITEC is even higher than the FD rate, which is 6.09%, which we can see a lot of local fund houses and foreign fund houses investing in it. In its latest Annual Report 2015, the management maintains the dividend allocation of minimum 70% of the net profit, the highest i encounter so far[1]. 

Net Cash per Share and Earnings Per Share

Another highlight will be its high net cash per share. The net cash per share is 0.4592, almost 30% from the closing price on 25 April of 1.73. 83% of its trade receivables are denominated in USD (RM8,57 mil) vs the 60% of its trade payables denominated in USD (RM13.66 mil). Eventhough the USD trade payables is higher than USD trade receivables, its short term deposits is enough to cover the shortage of RM5.09 mil as their USD short term deposits totals up to RM20.11 mil. Recently our Ringgit is showing some strength, which will ease the burden too. 

By comparing 2014 and 2015, the revenue from Europe and US had increased 19% and 52% respectively. UCHITEC is successful at attracting, retaining and developing their employees. They had been actively offering Employee Share Option Scheme (ESOS) as a token of gratitude to their employees for their tireless efforts for the company. At least they are taking the welfare of their staffs, compared to the market nowadays whereby a lot of people are losing their job.

ValueCap Sdn Bhd actually emerges as their top 30 shareholders, alongside with other local and international fund houses. Look at the list below, you will see more than 20 fund houses, for example, Lembaga Tabung Haji, Public Islamic Opportunities Fund, Amanah Saham Bumiputera, Manulife Investment Fund etc etc.

Top 30 Shareholders for UCHITEC

Still remember Valuecap Sdn Bhd? In 2015, when our PM announced that RM20 bil will be injected to support undervalued stocks. Truthfully we do not know how Valuecap define the undervalued stocks, but i am quite sure UCHITEC is in their list. UCHITEC had a high dividend policy with high cash balances to weather the stormy crisis. When our PM announced on the news of Valuecap, our FBMKLCI bounced up and closed at 36 points, regaining the confidence from the shareholders in the market. Valuecap Sdn Bhd, which was set up to support underperforming shares, had proven to be effective in stabilising the equity market. I strongly believe Valuecap Sdn Bhd will appear in some other counters. You can try to read some extra information on Valuecap Sdn Bhd.

2. Technical Analysis:

UCHITEC daily chart

When we look at the daily chart, it formed a golden triangle and breakout with a gap up on 19 April 2016, on the day it releases it Annual Report. The bullish engulfing is a bullish signal with high volume. If the gap is not been closed, then the bullish signal remains. The volumes are getting active these few weeks. And i assure UCHITEC will be more active if more people notice the emergence of Valuecap and the moment its bonus issue being approved. The share price actually gapped up on  24 February 2016 when UCHITEC announced the bonus issue of 1 for every 10 shares hold. Eventhough it is not as exciting, but still, it is offering 6 cents of dividend ex on 28 June 2016. 

I had drawn 2 resistances and 1 supports. If the share price can maintain above 1.73 for more than 5 days, i will assume that it is a successful breakout and will aim for the next target price, which is 1.84. However, do remember to cut loss. My support is drawn at 1.63. The RRR is not so attractive, with 1 portion of risk vs 1 portion of reward, considering the price bought in is 1.73. Do take note UCHITEC will be announcing its Q1 result in next month May.

Summary:

UCHITEC had been going up and downs due to the export theme. Eventhough the counter benefits from the USD strengthening theme, when we look at the top 30 shareholders, we are thrilled to see the Valuecap in its report, which i think we are among the early birds as the Annual Report is just published last week. With a huge spike in the volume on the same day as the report is announced, i  i believe that UCHITEC will be gaining more attention from the market.

- Consistent revenue and net profit with net profit margin of 44%.
- Practise the dividend policy of 70% from its net profit.
- Fundamentally steady company with high dividend policy of 6.09%, which is above the FD rate.
- Generous to the workers as they keep on offering ESOS to their workers.
- Emergence of Valuecap Sdn Bhd, which is assigned RM20 bil by our PM in 2015 to support undervalued stocks. Valuecap Sdn Bhd will be inviting more attention to the counter, so it is better to act fast and furious before others are aiming at it.
- Past history, Valuecap Sdn Bhd had proven to be effective in stabilising the local equity market, so this year, i think they will not fall either, as our FBMKLCI had broken the bearish signal when the SMA50 eases past SMA200.

- We might see a lot of stocks moving up due to May is the month of Q1 announcement month. Some stocks had shown advance movement.
- Had resistances of 1.73 and 1.84 vs support of 1.63.
- UCHITEC had gapped up and breakout from the golden triangle, aiming to stay challenge the 8 year's new high of 1.75.
- Previously gapped up due to the announcement of bonus issue made.
- Dividend of 6 sen ex on 28 June 2016.
- A lot of Annual Reports will be rolled out, stay in touch to see more updates from me for the next stock picks.
- I strongly believe Valuecap Sdn Bhd will appear in more counters after this.

Did U-CHI-TEC that *Valuecap* coming?

Gainvestor short term TP: 1.83
Gainvestor long term TP: 2.50

Let's Ride the Wind and Gainvest

Gainvestor 10sai

26 April 2016

12.480am

Sources:

[1]: UCHITEC Annual Report 2015: http://www.bursamalaysia.com/market/listed-companies/company-announcements/5061609
[2] http://www.thestar.com.my/business/business-news/2015/09/15/valuecap-boosts-market/

 

UCHITEC (7100) - UCHITEC - U SEE THAT II *VALUECAP* 

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