FY22 core net profit of RM99m (+11 YoY) matched HLIB and consensus estimate at 99% and 95%, respectively. Order book was flattish QoQ and remained at all time high level of slightly above RM190m. UWC is optimistic on its FY23 business outlook. In the near term, it expects to launch functional tester, progressively ramping up simulation system tester and commence production of new performance tester. Reiterate BUY with a higher TP of RM4.38 (34x of CY23 EPS). The ongoing trade intensity may eventually benefit UWC which provides a one-stop solution as more companies shift production out of China to avoid import tariffs.

In line. 4QFY22 core net profit of RM26m (-5% QoQ, +60% YoY) brought FY22’s sum to RM99m (+11% YoY) which came in within expectations, accounting for 99% and 95% of our and consensus full year forecasts, respectively. One-off items in FY22 include government grants amortization (-RM1.2m), impairment losses in trade and other receivables (+RM405k), forex gain (-RM6.7m) and gain on fair value adjustment on marketable securities (-RM115k).

Dividend. Approved an interim single-tier dividend of 2.91 sen (4QFY21: 1.67 sen) per share, representing 30% payout ratio. This will go ex on 20 Sep. FY22 DPS amounted to 2.91 sen (FY20: 1.67 sen).

QoQ. Turnover strengthened by 18% to RM103m mainly thanks to higher contribution from semiconductor. However, core net profit fell by 5% to RM26m as EBITDA margin shrunk by 5.7ppt.

YoY. Similarly, sales expanded by 61% mainly attributable to the sustainable solid demand from the group’s global customers in the semiconductor industry. In turn, core net profit also gained 60% as operational excellence led to sustained EBITDA margin of 42%. 4QFY22 other income increased due to the hiring incentive received throug h its participation in JomKerja@NCER programme introduced by NCIA under PENJANA to provide job opportunities to unemployed graduates and retrenched workforce.

YTD. For the same explanations above, top and bottom lines grew 21% and 11%, respectively.

Sales breakdown. For FY22, semi: 78% (FY21: 66%); life science / medical: 17% (26%); and others: 5% (8%).

Order book was flattish QoQ and remained at all-time high level of slightly above RM190m with semiconductor: 77%; life science / medical: 17%; and others: 6%.

Outlook. UWC is optimistic on its FY23 business outlook. In the near term, it expects to launch functional tester, progressively ramping up simulation system tester and commence production of new performance tester. The progress of 5G mmW tester development and V2V tester production set up remains on track. UWC also ventures into front-end semiconductor manufacturing for long-term business sustainability.

Forecast. We update our model with FY22 financial account. As a result, FY23-24 EPS are revised by -5% and -2%, respectively. We also introduce FY25 forecast. Reiterate BUY with a higher TP of RM4.38 (previously RM4.21), pegged to 34x of CY23 EPS (previously FY23). The ongoing trade intensity may eventually benefit UWC which provides a one-stop solution as more companies shift productions out of China to avoid import tariffs.

Source: Hong Leong Investment Bank Research - 7 Sept 2022