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Saturday, January 30, 2016

Stock Pick: Uchi Technologies Bhd



2016 hasn't really been that great in the stock market but if you are looking for companies with strong fundamentals and balance sheet, Uchi Technologies Bhd might be the right one for you.

Uchi Technologies Bhd is involved in original design manufacturing (ODM), specializing in the design of electronic control systems primarily for consumer and industrial electrical and electronic appliances industries (such as precision weighing scales and high end household appliances). 

The company had a bad start to 2016, falling by 9.8% to close at RM1.57 on January 29, the last trading day in January. This is in comparison with the FBM KLCI that had dropped by 1.5%. I think the recent drop in price makes the company at a rather attractive value for a long term buy.


Uchi Technologies had a rough start in 2016
The company has a strong balance sheet, cash rich and zero debt. As of the latest quarter report that was released in November last year, the company had RM153.3 million in cash and cash equivalent, where RM149.3 million are in short term deposits. This was an increase of RM20.3 million compared to its' 2014 audited report. 

Besides the strong cash flow, the company also has a consistent dividend payout record and it amounts to a dividend yield of about 6 to 7%. 

In its' 3QFY15 earnings report ended September 2015, Uchi Tech's revenue and operating profit for the quarter increased by 19% and 39% to RM29.4 million and RM14.5 million respectively compared to the quarter ended September 2014, mainly due to the appreciation of the USD against the Ringgit.

The management is expecting the revenue is USD to remain flat for the year ending December 2015.

Historically, the management has proven themselves to be able to help the company to sustain their revenue and income. While the stock might not see much exciting movement, I believe it is one of those counter that has a strong fundamentals to lean on in times of uncertainty. If you are looking for a high dividend yield counter with a strong cash flow to support, Uchi Tech is one of those we think you should put under your watchlist.

Uchi Tech is currently trading at RM1.57, with a PE ratio of 14.14 and market capitalization of RM615.99 million. 

Disclaimer: This is just an analysis of the stock based on our own opinion. We do not have any holding in the counter mentioned.

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