PETALING JAYA: Despite a weak start to its new financial year, UWC Bhd
is optimistic about its business outlook amid signs of recovery in the semiconductor industry.
The technology-services provider is currently looking at expanding its capacity for front-end semiconductor manufacturing and electric vehicle (EV) projects, with the first phase of its new facility in Batu Kawan Industrial Park, Penang expected to be completed by the first quarter of 2024, Hong Leong Bank Investment Bank (HLIB) Research said.
In addition, the research house pointed out that UWC has completed construction of its new fabrication site in Kamunting, Perak and is buying other land.
“In the long run, the group intends to house all its fabrication activities in Taiping, while Penang sites focus on high-end assembly jobs,” HLIB Research said.
HLIB Research reiterated a “hold” call on UWC, with a lower target price of RM3.24, compared with RM3.27 previously, based on an unchanged price-to-earnings multiple of 34 times the estimated earnings for the financial year ending July 31, 2025 (FY25).
The revised target price reflects HLIB Research’s cut in its earnings forecast for UWC.
“At this juncture, we think the risk-reward is fair, despite the ongoing trade tensions that may eventually benefit UWC, which provides a one-stop solution as more companies shift production out of China to avoid import tariffs,” HLIB Research said.
The brokerage cut its earnings forecasts for UWC by 16% for FY24 and 1% for FY25.
In the first quarter ended Oct 31, 2023 (1QFY24), UWC’s net profit fell 85.1% to RM4.35mil from RM29.25mil in 1QFY23 on lower revenue. Consequently, its earnings per share declined to 0.4 sen from 2.66 sen previously.
During the period under review, the group’s revenue slid 50.7% to RM45.46mil from RM92.12mil in the corresponding period last year.
HLIB Research noted the results were below expectations, accounting for only 1% of its full-year and consensus forecasts. The deviation was due to lower-than-expected revenue and margins, it said.
“Turnover shrank due to the impact of macroeconomic headwinds, especially with a semiconductor-market cyclical downturn,” HLIB Research said.
“The uncertainty caused shifts in consumer behaviour that led to fluctuations in market demand for electronic products and technological devices, thus temporarily affecting the semiconductor sector’s performance,” the research house added.
In a filing to Bursa Malaysia, UWC, citing the latest forecast from World Semiconductor Trade Statistics, said the semiconductor market is expected to experience a robust recovery, with a growth of 13.1% in 2024.
Expansion in 2024 is anticipated across all categories and primarily driven by the memory sector, it added.
“The group continues to focus on commencing new projects, bringing on board new customers and strategising long-term growth plans to optimise potential business opportunities,” UWC said.
