Company Background. United U-Li Corporation (ULICORP) is principally engaged in the manufacture and sale of steel cable support systems to meet support requirements of electrical cables & wiring networks in buildings and structures. It operates under 2 core business segments: cable support systems and electrical lighting & fittings. The group serves the mechanical & electrical industries of domestic and regional markets in ASEAN, Middle East and Australia.  

Prospects: (i) Malaysia's construction industry is set to grow, driven by the government's emphasis on completing infrastructural, industrial and energy projects. This is expected to boost demand for the group’s cable support systems and electrical lighting & fittings products in both domestic & international markets, (ii) Embarking on an expansion plan to develop new manufacturing facilities, which will boost output by 50% in FY25, and (iii) Upgraded machines with industrial robots to enhance automation as well as optimise design and production in a cost-effective controlled environment amid rising material and labour costs.  

Financial Performance. In 2QFY23, ULICORP posted a higher revenue of RM66.2mil (+16.4% QoQ) with a PAT of RM16.1mil (+3.8x QoQ). This was mainly due to higher revenue generated, improved profit margins, lower personnel expenses, stronger interest income and foreign currency exchange gains.  

Valuation. ULICORP is trading at an attractive FY23F P/E of 6.7x, which is lower than its 5-year forward average of 32.4x and Bursa Industrial Production Index’s 24.1x currently. As a comparison, Eonmetall Group, involved in manufacturing metalwork and industrial process machinery & equipment, trades at a much higher 37.2x trailing P/E.  

Technical Analysis. ULICORP may rise higher after it closed above the RM1.40 resistance and hit a new 52-week high 2 weeks ago. As the 20-day and 50-day EMAs have established a bullish crossover since late August, the upward momentum may persist in the near term. A bullish bias may emerge above the RM1.40 level, with stop-loss set at RM1.27, below the 50-day EMA. Towards the upside, the near-term resistance level is seen at RM1.70, followed by RM1.80.

Source: AmInvest Research - 2 Oct 2023