KUALA LUMPUR (March 15): Hong Leong IB Research (HLIB) has initiated coverage on Uchi Technologies Bhd at RM3.26 with a “Buy” rating and target price RM3.83 pegged to 19x of FY22 EPS.

In a note today, the research house said this valuation multiple is roughly +1.5SD above the 5-year historical mean P/E of 15x.

“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 ) commanding higher margin vs peers, and (iv) decent dividend yield of about 5% with tendency to tilt on the high side leading to support of any downside risk,” it said.

Biotech could serve as future catalyst in this pandemic era

HLIB said one of the products in Uchi’s pioneer status list is the ultra-low temperature and mass sensing control system.

It said this device is designed for the storage of biological materials (such as virus, bacteria, eukaryotic cells, stem cell and blood) mainly used in blood banks, hospitals, epidemic prevention services, research institutes and biomedical facilities.

Commenting on Uchi’s dividend policy, HLIB said it was taking a conservative stance and assumes only an 88% payout, translating to dividend per share of 17.0-18.7 sen for FY21-23.

“As of 4Q20, Uchi sits on a net cash position of RM156.7 million (NCPS: RM0.35) with no borrowings on its book,” it said.