Company Background. United U-Li Corporation (ULICORP) is principally engaged in the manufacturing and distribution of steel cable support systems, cable management systems, integrated ceiling systems, fluorescent light fittings and LED products. The group operates under 2 core business divisions: cable support system (CSS) and electrical lighting & fittings (Lighting). Its products are used in various sectors, including construction, power, transportation, telecommunication and oil & gas. ULICORP serves the mechanical & electrical industries in domestic and regional markets in ASEAN, the Middle East and Australia.

Prospects. (i) Construction industry is poised for growth, driven by the government's focus on infrastructure, industrial and energy projects, including data centrer. This is expected to boost demand for the group's products as the customer base expands and clients replenish their inventories, (ii) Lighting division is set to grow with new housing/commercial/industrial projects, driven by rising demand for energy-efficient LED lighting, (iii) Focus on enhancing manufacturing efficiencies by expanding the powder coating spray line to boost capacity, improving delivery lead times and implementing solar energy systems for cost savings, and (iv) Embarking on an expansion plan to develop new manufacturing facilities with the aim of boosting output by 50% in FY25.

Financial Performance. In 1QFY24, ULICORP posted a higher revenue of RM60.7mil (+6.6% YoY) with a PAT of RM8.5mil (+2x YoY). This was mainly due to higher revenue contributions from both the CSS and lighting divisions, improved profit margins, lower personnel expenses and better cost efficiency.

Valuation. ULICORP is trading at an attractive FY25F P/E of 8.5x, which is lower than Bursa Industrial Production Index’s 5-year forward average of 15x. As a comparison, Eonmetall Group, involved in manufacturing metalwork and industrial process machinery & equipment, trades at a higher trailing P/E of 13.5x.

Technical Analysis. ULICORP may rise higher after testing the RM1.90 support and rebounded above its 50-day EMA a few sessions ago. With the bullish hammer pattern formed on 6 Aug, additional upside strength may be present in the near term. A bullish bias may emerge above the RM1.90 level with stop-loss set at RM1.78, below the 50-day EMA. Towards the upside, near-term resistance level is seen at RM2.30, followed by RM2.40.

Source: AmInvest Research - 9 Aug 2024