ISLAMIC FINANCIAL MARKETS, INSTRUMENTS,

AND INSTITUTIONS
(BIFF5063)

INDIVIDUAL ASSIGNMENT
RESEARCH ANALYSIS
UWC BERHAD

SUBMITTED TO: DR. NASHIRAH ABU BAKAR

PREPARED BY:

WAN MOHD RUSHDI BIN W.A.LAH

S827022
MASTER IN ISLAMIC FINANCE AND BANKING
BACKGROUND OF COMPANY

UWC Berhad 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. This company has been classifies as Syariah
compliance securities by Syariah Advisory Council Securities Commision Malaysia. 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. UWC is a progressive and
diverse company since 1990 and have been assisting OEM customers around the world by
provide with value added contract manufacturing and assembly solutions. As an integrated
engineering supporting services provider, UWC Berhad provide fabrication services involving
various processes of working with metal such as cutting, forming, joining and other associated
processes to produce intermediate metal products, ranging from metal piece-parts to precision
machined components. These intermediate metal products are then used to produce various
finished products by their customers in a diverse range of industries such as, among others,
semiconductor, life science and medical technology, and heavy equipment.

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. 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.
UWC Holdings caters primarily to the local market, while UWC Industrial caters to the foreign
markets as well as customers in Malaysia with a LMW status or are located within the
designated free trade zones in Malaysia.
The group has two main business segments, namely: (i) sheet metal fabrication and assembly,
and (ii) precision machining services. Sheet metal fabrication and assembly has been a key
contributor of the total group revenue
This flow chart explain detail about Structure UWC Berhad and Product and services offered
by UWC Berhad as below:

Flow Chart 1 : Structure of UWC Berhad

UWC Investment Holding

UWC Holdings

UWC Indsustrial
Provision of precision sheet
metal fabrication and value-
added assembly services
Provision of precision sheet
UWC metal fabrication and value-
added assembly services
Automation
Provision of
precision machined
components

Flow Chart 2 : Products and services of UWC Berhad

Source from Prospectus IPO UWC Berhad

FINANCIAL PERFORMANCE
This company showed strong growth revenue and profit and improved every quarterly and
yearly from 2019( Jul 2019) until now (Mac 2021). UWC’s latest quarterly report as published
on 2 March 2021 for second quarter 2021 , it once again shows the company continues to record
the highest revenue and profit compared to the previous quarter. It show this company
recorded top revenue with an increase of 8.8%, which was RM77.8 million compared to
RM71.5 million in the previous quarter (1st quarter 2021) Profit Before Tax (PBT) also showed
an increase of 22.2%, from RM28.7 million to RM35 million. This excellent improvement is
contributed from two main sources, namely the semiconductor industry and also the "life
science & medical technology" industry. This is in line with the very good demand in the
semiconductor market and also in the sector "medical technology, laboratory & test equipment"
due to the COVID-19 pandemic that hit the world. Revenue from these four segments
contribution has contributed 59 % (semiconductors) and 32.8 % ("life science & medical
technology")and 4.1% (heavy duty) and 4% (others) to the current financial performance of the
company. On 18 Feb 2021, UWC has also completed the issuance of Bonus Issue to their
shareholders as reward and token for their shareholders. Bonus issue is an offer of free
additional shares to existing shareholders and to distribute further shares as an alternative to
increasing the dividend payout. Bonus issue also give additional (free) shares are given to the
existing shareholders, based on the number of shares they already have. Bonus shares are issued
according to each shareholder’s stake in the company and do not dilute shareholders’ equity,
because it issued to existing shareholders in a constant ratio that keeps the relative equity of
each shareholder the same as before the issue.
Table 1 : UWC Berhad Quarterly reports.

Source from website isaham.my

PROSPECTS FOR UWC BERHAD FOR 2021
UWC is very optimistic with the company's prospects where both the semiconductor industry
and "life science" are projected to continue to grow in the coming years. Based on statistics
from World Semiconductor Trade, semiconductor chip sales will grow at a rate of 8.4% in
2021, and revenue from the semiconductor industry is targeted to increase by 12%. These
projections are supported by recovery plans for 2021 and an increase in international trade. For
sales and revenue in the field of semiconductors, it will be driven by the increased use of
technology in the automotive sector, AI, smart devices, 5G, cloud storage for data centers and
other applications that require chip processors. UWC is a major player in the semiconductor
industry for the "test equipment" segment.
The company has targeted to issue "autonomous vehicle reliability chip testers" by the end of
the second quarter of 2021, in addition the company is also developing 5G NR millimetre wave
tester with their customers and is "the current fastest tester" on the day this. UWC will continue
to focus on the existing business chain and will produce more front-end, automated test
equipment and 5G test equipment on smart devices. For the "Life Science" segment, the
demand for Covid-19 virus test equipment will continue to be strong because the equipment
produced by the company is able to test new "virus strands". The new mutations of Covid-19
also cause the demand for these devices will continue to be sustained in line with the
development of vaccines where the company is directly involved in the segment of "medical
testing" and diagnostic settings. In order to increase the speed of production operations, UWC
has acquired "automation machines" such as robotic arms and "cobot" in addition to
construction and modification of their facilities that are able to receive higher orders from new
and existing customers. UWC is committed to continue to drive the company's development in
line with their "strategic corporate expansion" plan
Currently, demand from chip testers and handlers will continue to increase. This demand is
mainly driven by the global shortage of semiconductor chips for the automotive industry and
also the advancement of technology that requires chips in its use, especially in automotive,
smart devices, 5G, and also cloud storage. Therefore, UWC Berhad has successfully increased
the value chain in semiconductor by providing front-end semiconductor equipment, automated
test equipment, and 5G test equipment. Production for the autonomous vehicle chip tester will
begin at the end of 2021. Currently, UWC is producing 5G test equipment, namely the 5G NR
millimeter - wave tester. This 5G test equipment is the fastest tester globally at this time.
In term of capacity expansion, UWC Berhad is ready to build 10k class cleanrooms dedicated
to cater orders from the front-end to produce semiconductor equipment. It is to increase
production capacity, they have changed the production walkaway and store to be used as an
assembly bay. New automation machines have been purchased to increase their efficiency in
production.
CONCLUSION
As conclusion, UWC Berhad has managed to attract many investors to invest in this company.
Currently, Market Capitalization for this company is valued as RM6.934 Billion as closing
price RM6.30 on 9 April 2021. Eventhough, Price Earning Ratio for this company at 84 times
and ROE is 14.56, share price this company still considered undervalued because the share
price has experienced some selling pressure in early Mac 2021 as it has experienced strong
selling pressure in early Mac 2020 due to the covid 19 pandemic and at the same time the
government is implementing Movement Control Orders nationwide. We can see the movement
of the share price of this company still in uptrend mode as flow chart below. From this flow
chart, we can see support level at RM5.78, resistance price at RM5.82 and the highest price at
RM7.36 .I believe, the share price of this company will increase in the future in line with the
increase in revenue and profits for this company and it will generate in the future by taking the
following factors :
1. This company has continued to see earnings growth every quarter since listing and
management continues to be optimistic with their 3 key growth catalyst supporting the
semiconductor, 5G and life science which are all major MNC clients.
2. This company almost like (OSAT + ATE + EMS) a unique positioning OEM providing
complete solutions as evidenced by their superior margins
3. Capacity expansion for this company moving up the value chain (completed
cleanroom) growing with their key clients
4. This company investing in automation, machineries, equipements while renting factory
space (maximise its returns) and improve efficiencies

Flow Chart 3 : Technical Analysis for Price Movement of UWC Berhad

Source from Mplus Securities Sdn Bhd