Results Note

19 August 2021

United U-Li Corporation OUTPERFORM ↔

1HFY21 Within Expectation Price: RM1.21
Target Price: RM1.85 ↓
1HFY21 CNP of RM19.1m met our expectation. However, YTD Expected Capital Gain: +52.9%
dividend of 2.0 sen is deemed below. In the immediate term, Expected Divd. Yield: +4.5%
Ulicorp is likely to dominate market share within the CSS Expected Total Return: +57.4%
space as smaller competitors wane under the pandemic.
Meanwhile, Ulicorp has deferred their capacity expansion KLCI Index 1525.24
plans as construction progress has been affected by the
Stock Information
FMCO. Consequently, we reduce FY22E earnings by 8% after
Bloomberg Ticker UULI MK Equity
stripping off the anticipated capacity expansion imputed. Bursa Code 7133
Reiterate OP with lower TP of RM1.85 (from RM2.00) on 10x Listing Market Main / ACE Market
FY22E PER. Shariah Compliant Yes
Within expectations. 2QFY21 CNP of RM9.4m brought 1HFY21 CNP to Shares Outstanding 217.8
RM19.1m - within our expectation at 46% of full-year estimates. Market Cap (RM m) 263.5
Par value per share (RM) N.A.
Declared 1.0 sen dividend, bringing YTD dividend to 2.0 sen. Total 52-week range (H) 1.60
dividend declared to date is deemed below our full-year expectation of 52-week range (L) 0.38
11.5 sen (based on 60% payout assumption) as the group may be Free Float 39%
exercising prudence on the payout ratio amidst uncertainties over the Beta 1.6
duration of the pandemic. In addition, cash on hand can be utilised to 3-mth avg daily vol: 755,883
secure raw material purchases amidst the steel shortage currently being Major Shareholders
experienced within the sectors supply chain. In light of this, we reduce our
Pearl Deal M SdnBhd 37.2%
payout assumption to 30% - translating to a DPS of 5.5 sen for FY21.
Yeoman Rights Value Fnd 4.6%
QoQ, 2QFY21 CNP of RM9.4m only decreased marginally by 3% despite Employees Provident Fund Board 3.8%
revenue coming off 15% as FMCO lockdowns (starting June 2021) Summary Earnings Table
severely impacted sales deliveries in the month of June. The strong net FY Dec (RM m) 2020A 2021E 2022E
margins (of 22%) achieved this quarter is mainly attributable to the sharp
Turnover 159.2 202.1 226.5
CRC steel price increase in the month of April and early May while EBIT 8.9 54.6 53.7
inventory costs lagged. YoY, 1HFY21 CNP of RM19.1m roared back into
PBT 5.7 53.6 52.7
the black from a loss position of RM5.0m mainly due to stronger steel Net Profit 3.5 41.3 40.6
prices, reduction in competition and the absence of the initial Covid-19 Core PATAMI 5.6 41.3 40.6
lockdown measures (in Mar 2020) which halted economic activities and Consensus (NP) n.a. n.a. n.a.
capped deliveries in 1HFY20. Earnings Revision n.a. 0% -8%
Capacity expansion plans on hold. Ulicorp’s initial plans to construct a Core EPS (sen) 2.6 18.9 18.6
new factory and hostel (with capex of RM20m) in Nilai is deferred till next Core EPS growth (%) n.m. 634.2 -1.6
year amidst the uncertainties arising from the pandemic. To recap, Ulicorp NDPS (sen) 1.0 5.4 7.5
has planned for the new factory to be completed by 3QFY22 but its plans NTA per Share (RM) 1.34 1.47 1.58
have been stymied by the FMCO imposed in June. Currently, only PER (x) 46.9 6.4 6.5
earthworks have been done on the site. PBV (x) 0.90 0.82 0.76
Debt-to-Equity ratio (x) N.C N.C N.C
Vaccination rates. According to management, 70% of its workforce Net Div. Yield (%) 0.8 4.7 6.2
would be fully vaccinated by Aug 2021 and the group is currently operating
at c.60% levels. With the re-opening of the construction and E&E sectors Share Price Performance
1.80 1900
starting 16th August 2021, orders have started to trickle in, and we expect 1.60
1700
the sales momentum to pick up moving forward. 1.40
1500
1.20
Likely to dominate market share in the near term. Operating in a 1.00 1300
fragmented CSS (Cable Support Systems) space, Ulicorp’s competitors 0.80 1100
who are smaller in size would find it difficult fulfilling end-orders amidst (i) 0.60
900
cash-flow issues arising from the prolonged lockdowns and (ii) inability to 0.40
700
secure raw materials (i.e. CRC) due to the worldwide shortage. Being a 0.20

dominant player, this provides Ulicorp the opportunity to increase its 0.00 500

market share and command pricing power, translating to strong and stable
margins.
UULI MK Equity FBMKLCI INDEX

1 mth 3 mths 12 mths

Keep FY21E earnings unchanged but reduce FY22E earnings by 8% Absolute (%) 14.2% -0.1% 227.9%
after stripping out contributions from the anticipated capacity expansion. Relative (%) 13.9% 3.6% 230.3%
Reiterate OUTPERFORM with lower TP of RM1.85 (from RM2.00) on
unchanged 10x FY22E PER. Risks to our call include: (i) lower-than- Lum Joe Shen
lumjs@kenanga.com.my
expected sales of CSS products, and (ii) inability to pass on higher steel
+603-2172 2632
prices.

PP7004/02/2013(031762)www.kenanga.com.my www.bursamids.com Page 1 of 4

 United U-Li Corporation Results Note
19 August 2021

Stock Ratings are defined as follows:

Stock Recommendations

OUTPERFORM : A particular stock’s Expected Total Return is MORE than 10%

MARKET PERFORM : A particular stock’s Expected Total Return is WITHIN the range of -5% to 10%
UNDERPERFORM : A particular stock’s Expected Total Return is LESS than -5%

Sector Recommendations***

OVERWEIGHT : A particular sector’s Expected Total Return is MORE than 10%

NEUTRAL : A particular sector’s Expected Total Return is WITHIN the range of -5% to 10%
UNDERWEIGHT : A particular sector’s Expected Total Return is LESS than -5%

** The Expected Total Return might contain rounding discrepancy.

***Sector recommendations are defined based on market capitalisation weighted average expected total
return for stocks under our coverage.

This report has been prepared by Kenanga Investment Bank Berhad pursuant to the Mid and Small Cap Research Scheme (“MidS”)
administered by Bursa Malaysia Berhad. This report has been produced independent of any influence from Bursa Malaysia Berhad or the
subject company. Bursa Malaysia Berhad and its group of companies disclaim any and all liability, howsoever arising, out of or in relation to
the administration of MidS and/or this report.

This document has been prepared for general circulation based on information obtained from sources believed to be reliable but we do not
make any representations as to its accuracy or completeness. Any recommendation contained in this document does not have regard to the
specific investment objectives, financial situation and the particular needs of any specific person who may read this document. This document
is for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees. Kenanga
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solicitations of an offer to buy or sell any securities. Kenanga Investment Bank Berhad and its associates, their directors, and/or employees
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