Investment Highlights

• UWC Bhd is an integrated engineering support services provider, mainly dealing with the provision of precision sheet metal fabrication, assembly services and the fabrication of precision machined components. The group supplies its components and services to various industries including players in the semiconductor, life science and medical technology, as well as the heavy equipment sector.

• Historically, about 50% of UWC’s revenue is anchored by two key customers, mainly Agilent and Customer A from the life science and medical technology and semiconductor respectively. Other notable customers include Bromma (Malaysia) S.B. and Plexus.

• In a bid to increase its capacity and improve efficiency, the bulk of its IPO proceeds (RM32.1 mln or 56.0%) has been earmarked to finance the purchase of new CNC machines and industrial robotic equipment, as well as material system to enhance automation process. The remainder, meanwhile, will be used to pare its borrowings (31.3%), fund working capital (5.0%) and defray listing expenses (7.7%).

• At an indicative offer price of RM0.82 per share, UWC trades at an estimated FY20 PER of 11.0x, above the average industry PER of about 9.0x-10.0x, indicating limited upside potential, in our view.

Group Background

UWC Bhd (UWC) was incorporated on 29th Marc, 2018 as a private limited company under the name of UWC Sdn Bhd. Following the acquisitions of UWC Holdings and UWC Industrial on 4th June 2018, the group was then converted into a public limited company on 17th October 2018 and subsequently renamed as UWC Bhd.

The group is an investment holding company that owns subsidiaries principally involved in the provision of precision sheet metal fabrication with value-added assembly services and the provision of machined components. Both subsidiaries offer the same services where UWC Holdings caters mainly to the local market, while UWC Industrial caters to foreign markets and local customers with a LMW status or are located within the designated free trade zones in Malaysia.

UWC’s history dates back to 1990 with the incorporation of UWC Holdings, a private limited company under the name Unique Wire Cut Sdn Bhd. The company began by supplying wire cut machines to customers from various industries and ventured into the fabrication and sale of moulds in 1992, while also expanding to offer metal stamping services in the same year.

In 1997, UWC Holdings established its first manufacturing plant in Bukit Minyak, Penang while expanding its service offerings to include sub-assembly of metal pieceparts into frames and enclosures with the addition of a second manufacturing plant in 2007 following its business growth.

UWC Automation was incorporated in 2000 as part of UWC Holding’s strategy to transform into an integrated engineering supporting services provider to manufacture precision machined components, enabling the company to expand its service offerings.

In 2005, UWC Industrial was incorporated to focus on providing precision sheet metal fabrication and sub-assembly services to the semiconductor sector, offering customised products and solutions. Subsequently in 2010, UWC Holdings secured its first order to provide full-assembly services for the semiconductor industry, paving the way for more orders for full-assembly services in different sectors.

UWC Holdings have gradually expanded their customer base by venturing into the life science and medical technology industry in 2006 and the heavy equipment industry in 2014. In 2018, the company merged and relocated its manufacturing plants to a new facility with a larger floor space located in Batu Kawan, Penang to accommodate its growing customer demands. In the same year, the group established the UWC Edu Center in collaboration with Seberang Perai Polytechnic to conduct classes in the welding process, while providing internship opportunities.

Source: Mplus Research - 9 Jul 2019