Looking For Yield: Uchi Technologies

In view of such SUPER LOW FD rates and assuming I have excess funds, I want to look for dividend yield stocks. What possibly be my criteria?

  1. At least 4% dividend yield (being 2 times FD rate of 2% and below) and not exceeding 6% dividend yield (to have more sustainable dividend payout in the future)
  2. Not too small market cap, at least USD100 mil and above
  3. D/E not more than 25%
  4. Net profit margin at least 8%
  5. ROE >8%
  6. Revenue growth (last) > 2%

Enclosed herein – the results based on the above criteria:

Screening

Let’s look at the first one with highest dividend yield (5.97%): UCHITEC

Uchi Technologies Berhad (MYX7100) is a Malaysian publicly traded company that is involved in the design, development, and manufacture of miniature data terminals, fuzzy logic controllers, controlled modules for precision weighing scale, dynamic sound improvement processor, PCB assembly, timer, printer, computing scales and industrial controllers. It was incorporated on 18 February 1998 in Malaysia.

Uchi is the largest producer of coffee modules in the world. The manufacture of these coffee maker modules, the control centre of coffee machines, account for 80% of Uchi’s profits. Uchi makes control modules for almost all the major coffee makers like Jura (Swiss), Krups (German), AEG (German), Bosch (German), Siemens (German) and Nestle (Swiss). Uchi believes that the outsourcing trend will continue as it is more cost effective for the coffee maker brands to concentrate on design and branding while outsourcing the coffee modules to Uchi, which controls key intellectual properties used in the modules.

Other activities include assembly of electrical components onto printed circuit boards (PCB) and trading of complete electrical module and saturated paper for PCB lamination.

UCHITEC

My final thoughts:

  1. I will consider this possible investment in consideration for its dividend yield that approximates 6%
  2. Net cash position
  3. Reasonable earnings growth and ROE
  4. Technically, not on a downtrend
  5. Latest prospects – generally positive

COMMENTARY ON CURRENT YEAR PROSPECT (AS PER LATEST QUARTERLY RESULT)
Barring any unforeseeable impacts that may be caused by the COVID-19 pandemic and/or by the US-China conflicts in various areas, the Group is expecting to have a stronger second half based on current customers’ demand. With the expected stronger second half, the Group’s prospective low double digit decline in turnover in USD for the current financial year in comparison to the financial year ended December 31, 2019, is expected to move towards the lower end of the low double digit range. Nonetheless, the Group is confident that we will remain profitable and maintain a strong balance sheet.

Disclaimer: This is not an endorsement or investment advice. Please refer to the general disclaimer of this blog.

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