Uchi’s 4Q21 core PAT of RM22.7m (QoQ: -7%; YoY: -29%) brought FY21’s sum to RM91.1m (YoY: +10%). This fresh record results came in within expectations, accounting for 102% of our and consensus full year forecasts. The group has guided for low-teens percentage revenue growth in USD terms for FY22 aided by robust demand of its products. Maintain BUY with unchanged TP of RM3.83 based on PE multiple of 19x pegged to FY22 EPS. Uchi not only remains a compelling yield play (c.5.4%), we also expect the demand for automatic coffee machines to remain elevated supported by its main customer J’s relentless expansion into new markets.

In line. Uchi’s chalked in 4Q21 revenue of RM42.5m (QoQ: -4%; YoY: -21%) translating into core PAT of RM22.7m (QoQ: -7%; YoY: -29%), which brought FY21’s sum to RM91.1m (YoY: +10%). This came in within expectations, accounting for 102%/102% of our/consensus full year estimates. FY21 core PAT was arrived after adjusting for (i) forex gain (-RM2.3m); (ii) gain on disposal of PPE (-RM8k); and (iii) loss on derivative of financial instrument (+RM2.0m).

Dividend. Declared interim dividend of 11.0 sen per share (4Q20: 9.5 sen per share). The entitlement date will be announced in due course. FY21 dividend amounted to 20.0 sen per share (FY20: 17.0 sen per share).

QoQ/YoY. Top line moderated by -4% QoQ/-21% YoY to RM42.5m due to the softness in demand for the group’s products and services with seasonal fluctuations. Note that 3Q is the strongest quarter for the group in anticipation of elevated demand from Christmas and holiday season. Subsequently, bottom line declined -7% QoQ/-29% YoY due to EBITDA margin deterioration by -2.2ppt QoQ/-6.4ppt YoY.

YTD. Sales staged a 9% increment due to healthy demand for the group’s products and services coupled with low base effect from operation shut down when MCO1.0 was first implemented. Sales across all regions continue in expansionary mode with highest growth from Asia Pacific (+34%), followed by US (+32%) and Europe (+8%). Revenue increase, EBITDA margin improvement (0.6ppt) and lower effective tax rate (FY21:0.8% vs FY20: 1.0%) aided to another fresh record core PAT of RM91.1m (+10%).

Outlook. We laud the group’s performance in maintaining growth trajectory with a resilience pace of revenue increase. This commendable showing was recorded despite the 60% operation constraints during the Phase 1 restrictions. Management has guided for low-teens percentage of revenue growth in USD terms for FY22 buoyed by strong demand from the Art of Living segment. Uchi not only remains a decent yield play (c.5.9%), we also expect the demand for automatic coffee machines to remain elevated supported by its main customer J’s relentless expansion into new markets. With the pandemic inducing a “new normal”, consumers are increasingly switching to home-brewed alternatives. Additionally, with Customer J’s recently launched coffee machine with cold brew option, we expect demand to remain strong owning to the rising popularity of chilled brews. Note that this is the first of its kind to offer cold brew with a touch of a button.

Forecast. Unchanged.

Maintain BUY, TP of RM3.83 is unchanged based on PE multiple of 19x pegged to FY22 EPS. We like Uchi for its (i) stable earnings drivers being the sole supplier and R&D partner for its customers; (ii) involvement in indispensable market of coffee and biotech division that could serve as future catalyst in this pandemic era; (iii) business commanding higher margin vs peers; and (iv) decent dividend yield of >5% with tendency to tilt on the high side, acting as an support of any downside risk.

Source: Hong Leong Investment Bank Research - 24 Feb 2022