MORNING CALL: 6/12/23

Notwithstanding UMediC Group’s 1Q result hiccup, Phillip Research says it remains positive on the company’s long-term growth plan

Transcript

00:00 Our stock in focus this Thursday morning is Umetic Group, which just released its first

00:07 quarter FY24 results.

00:09 Philips Research keeping its buy call on the stock, though it cut its target price to 87

00:14 cent from 92 cent.

00:16 The counter settled yesterday at 73 cent.

00:19 So excluding a one of forex gain, Umetic's first quarter core net profit was down 48%

00:24 quarter on quarter and 13% year on year to RM1.7 million.

00:29 This missed estimates at 16% of Philips Research's full year expectations and 14% of consensus

00:35 forecast.

00:36 Notwithstanding the earnings miss, revenue was largely in line, comprising 22% of both

00:42 respective forecasts.

00:44 Now according to Philips Research, this deviation from the forecasts was predominantly due to

00:49 the increase in marketing and administrative expenses, as Umetic attempted to tap into

00:54 new markets, where it also marginally lowered the product's selling prices this quarter.

01:00 The research house lowering its FY24 earnings forecast by 13% to account for the higher

01:05 operating costs.

01:06 Still, it remains positive on Umetic's long-term growth plan, backed by its unique business

01:11 exposure and new factory expansion.

01:14 So what's the consensus?

01:16 According to the latest Bloomberg data, there are four buy calls on the stock, with an average

01:20 target price of 95 cent. Umetic last traded at 73 cent, so that's a potential return of

01:26 30%.

01:27 [music]