UWC back on investors radar as it banks on expansion

UWC Bhd’s buying interest has resumed. Investors interest is returning after optimism that the worst may be over for the semiconductor outfit.

For one, many believe the ongoing trade war may eventually benefit UWC, which provides a one-stop solution, as more companies shift production out of China to avoid import tariffs. Also, the recent share price correction presents a favourable risk-reward scenario.

The optimism was despite UWC's core profit after tax and minority interest of RM13 million for the financial year ended July 31, 2024 (FY2024), which showed a decline of 76% year-on-year (y-o-y). This came short of consensus estimates, mainly due to a lower-than-expected earnings before interest, tax, depreciation and amortisation margin.

On a brighter note, UWC reported a sequential increase in its order book to RM140 million, with the semiconductor front-end accounting for 26% to 27% of the total. Y-o-y, turnover jumped 90%, boosted by a robust recovery in the semiconductor industry and contributions from recently acquired subsidiaries.

Core earnings saw an almost fourfold increase, despite higher depreciation and amortisation (D&A) and an effective corporate tax rate.
Year-to-date, revenue declined 9%, as better results in other segments was insufficient to offset the drag from the semiconductor sector. As such, the bottom line fell by 76%, impacted by higher D&A and the effective corporate tax rate.

For FY2024, 48% of sales came from semiconductors (down from 66% in FY2023), followed by life science/medical at 28% (up from 25%), and others at 24% (up from 9%).

What is drawing investors interest is the company's focus on expanding its capacity for front-end semiconductor manufacturing and electric-vehicle projects.

UWC aims to complete Phase 2 of its new facility in the Batu Kawan Industrial Park by December, with the construction of a new clean room for its front-end business expected to be finished by next year. Essentially, UWC’s expansion augurs well for its future growth, which will eventually be reflected in its share price.