Uchi Technologies Bhd has won the award for the highest return on equity (ROE) over three years, for the period between the financial year ended Dec 31, 2019 (FY2019) and FY2021, for the third year in a row. This demonstrates the electronic control system maker’s resilience even during trying times.
The Penang-based company is primarily an original design manufacturer (ODM) that specialises in the design, research, development and manufacturing of electronic control systems, and serves clients producing fully automated coffee machines. Its key clients include well-known European names such as Jura, Nestlé, Krups, Bosch and Siemens.
This is why the European region accounted for 97% of its revenue in FY2021, with Switzerland and Portugal being its two largest export markets, contributing 44% and 43% of total revenue respectively. Germany (7%) and the UK (3%) are its third- and fourth-largest export markets respectively, and its products are also sold to the US, Japan, China and India markets, its 2021 annual report shows.
During the period under review, Uchi delivered a commendable adjusted weighted ROE of 49.1%. It reported an ROE of 48.5% for 2019, 49.1% for 2020 and 49.3% for 2021.
In FY2021, it posted a high annual profit after tax (PAT) of RM91.46 million as revenue rose to a new high of RM168.51 million, giving it a profit margin of 54%.
On a year-on-year basis, Uchi’s PAT increased 9% from RM83.83 million in FY2020, while revenue was up 8.5% from RM155.26 million in the previous year, partly thanks to the strengthening of the ringgit against the US dollar, which is the currency its revenue is denominated in.
The better revenue, it said, can also be attributed in part to the Covid-19 pandemic, which set in motion home-based lifestyles that led to an increase in demand for its product.
It recorded a PAT of RM75.95 million in FY2019 with a revenue of RM156.67 million.
Uchi has consistently delivered on its commitment to distribute at least 70% of net profits as dividends. It paid out 20 sen per share for FY2021, which is equivalent to a payout ratio of 99%. It paid 17 sen and 16 sen per share for FY2020 and FY2019 respectively, with both being over 90% payout ratios.
On its prospects, the group remains “cautiously optimistic” in anticipating revenue in the US dollar to grow by a low-teen percentage y-o-y in FY2022, supported by growing demand for its products and services.
For the cumulative six months ended June 30, 2022 (1HFY2022), the group’s net profit surged 37% to RM59.66 million from RM43.6 million in the same period a year ago, as revenue recorded double-digit growth of 28.8% to RM105.08 million from RM81.57 million a year earlier.
At the time of writing, Bloomberg data showed that all four analysts had placed a “buy” call on Uchi, with an average 12-month target price of RM3.53, implying an upside of 7.6% compared to its closing price of RM3.28 on Oct 28.
Inter-Pacific Research Sdn Bhd said on Aug 26 that Uchi’s sales have been growing robustly in 1HFY2022, indicating strong household spending on coffee machines and its being unfazed by inflationary conditions.
“It is widely believed that its client has lined up several premium coffee appliances in 2022, fuelling a growth trajectory which we believe is already partly reflected by Uchi’s performance. Given that the client has made record sales in 2021, we think that the group would be able to carry over the strong outperformance going into the second half of this year (2HFY2022),” it added.
Meanwhile, CGS-CIMB Research expects Uchi to offer attractive dividend yields of 7.7% to 8.1% between FY2022 and FY2024, supported by a strong net cash position. It says the company had a healthy cash balance of RM198 million (44.5 sen per share) with zero borrowings as at end-June 2022.
Uchi’s largest shareholder is Ted Kao De-Tsan, a Taiwanese who held indirect interest of 19.16% and direct interest of 0.6% as at March 17, 2022. The 64-year-old executive director founded Uchi Electronic Co Ltd in Taiwan in 1981. Eight years later, he selected Penang as the manufacturing base and founded Uchi Electronic (M) Sdn Bhd and Uchi Optoelectronic (M) Sdn Bhd.
Besides Malaysia, it has an operating site in Dongguan City, Guangdong Province, China.