Research firm lowers Uchitech to ‘neutral’

PETALING JAYA: Inter-Pacific Research Sdn Bhd has downgraded its recommendation on Uchi Technologies Bhd (Uchitech) to “neutral” with a higher target price of RM2.78.

Last June, the research house initiated coverage on the group with a “buy” recommendation and a target price of RM2.28.

The stock closed two sen lower at RM2.82 yesterday with a total of 663,500 shares traded.

In a note yesterday, Inter-Pacific Research analyst Wong Ling Ling said the stock has climbed and outperformed the research house’s valuations recently.

“However, we retain a favourable view of this counter as we believe that the group will be able to sustain their earnings for the medium term and at the current price, the stock still offers an attractive dividend yield of 4.6%.”

Wong said the research house rolled forward its valuations to financial year 2018 (FY18), while it continues to value the group using a sum-of-parts approach which includes dividend discount model (DDM) valuation plus net cash per share.

“Our DDM valuation includes a forecast of a dividend per share of 14 sen for FY18. We have revised our earnings forecast for Uchitech’s FY18 earnings to account for the pioneer status tax benefit that it will enjoy for the next five years.”

Wong added that the group’s subsidiary Uchi Optoelectronic (M) Sdn Bhd was recently granted the renewal of the pioneer status by Malaysian Investment Development Authority (Mida), which enables the company to enjoy 0% tax rate for their products.

He said the renewal is effective for a period of five years from the production date which has yet to be fixed by the authorities.