The Three Wishes for Uchi

The Three Wishes for Uchi

There are quite a few old folk tales out there that feature "The Three Wishes". One of this is a story about three wishes with really bad consequences. It  is from One Thousand and One Nights (a.k.a. Arabian Nights), a very famous collection of stories from the Middle East and South Asia.

In the story in One Thousand and One Nights, a man is granted three wishes. His wife urges him to wish for a bigger, um, you know (the translation we read rather hysterically calls this bit the male anatomy a "prickle" and a "yard"). It's a disaster and his wife is horrified, so the man wishes it smaller, but then it totally disappears. His final wish is used to put things back the way they were before he ever made a wish. Ha, ha.

Other folk tales feature this basic formula: two foolish wishes are made and the third wish is used to bring things back to the way they were.

So, what has "The Three Wishes" got to do with Penang-based company Uchi Technologies Bhd?

Well, shareholders of Uchi must be wishing too that "The Three Wishes" will come true for this high-dividend paying company.

Uchi Technologies Bhd.

Uchi Technologies Bhd. is one real generous stock that really paid good dividends to its shareholders during the last many years. Although its policy is to pay out at least 70% of its profit after tax, there were usually many years when its dividends was almost 100% or even exceeded more than 100%.

The last three years saw Uchi paying out dividends of 12 sen per share for each financial year. Shareholders who bought the shares especially the last three years must be very happy with the slow and steady share price from RM1.10 plus to its current share price of RM1.40 plus.

The business of Uchi is designing and making electronic control modules for coffee machines and precision weighing machines. Europe is its main focus and its revenue from the European continental is almost 96%.

Now, here are The Three Wishes for Uchi

What will propel Uchi's share price to move higher from its current price? As a shareholder myself, I have only three wishes for Uchi which I believed will be the catalysts.

Wish No. 1

The weakening ringgit vs the strengthening green backs. As Uchi trades 100% of its business in US dollars, a stronger dollar in currency exchange would translate into higher earnings. This is already happening as the ringgit has been on a weakening mode for several months. As the saying says, the stronger US dollar is either a bane or boon to different companies conducting export and import business. (Wish No. 1 is already happening!)

Wish No. 2

An improving economic environment in Europe. According to a  report from The Edge dated October 14th, 2013, encouraging economic data has been emerging from Europe. The retail sales for August were better than expected and the Markit's composite purchasing manager's index rose to a 27-month high in September. If this momentum continues, it could only means that more of Uchi's products would be sold there! The more, the better! (Wish No. 2 looks very encouraging and hopeful!).

Wish No. 3

Pioneer status of Uchi Optoelectronic Sdn Bhd expired on December 31st, 2012. This means profits generated are now subjected to a corporate tax rate of 25%, which bumped up income tax expenditure to RM3.2 million in the second quarter  ended June 30th, 2013 from RM200,000 a year ago.

Uchi is still waiting for a reply  from the authorities for its application submitted in September last year  for pioneer status for its new products. Note that companies with pioneer status enjoy different degrees of tax exemption for a minimum of five years. (Wish No. 3 is still pending from the authorities).

Recently, Public Investment Bank valued Uchi at RM1.34 a share based on a price-earning multiple of 13 times on the group's Financial Year 2014 earning per share. Somehow, the market do seem to agree with this. The price is now at RM1.46 at the time of writing.

Like all beautiful ending in fairy tale's story, the writer is hoping that the three wishes would eventually come true in the end for all Uchi shareholders. And that would mean bumper good dividends again! Watch out for the first two weeks of December 2013, that is the time Uchi will announce its first interim dividend and also normally payable by the end of the same month, i.e. December 2013.

One Good "Seng" continues to do well

One Good 'Seng" of Bursa Malaysia was my first posting featuring low-profile and high-paying dividend stock Hup Seng Industries Berhad on July 21st 2013.

At that time of posting, Hup Seng was trading at around RM4.30. Its share price closed at RM5.20 on November 14th 2013 at the time of writing, giving investor a gain of over 20% from its RM4.30 level (when you included the interim dividend of 15 sen paid on October 24th 2013).

Hup Seng's share price continues to do well. Why? Its recently 3rd Quarterly report showed its total nine months earning per share is 22.83 sen compared to last years' nine months of 20.09 sen, an improvement of 13.6%.

As a debt-free company, its cash and cash equivalents is RM85.5 million as at its 3rd Quarter 2013.

Investors of Hup Seng would be pleased to know that Hup Seng biscuits are being served to patients of Pantai Hospital Penang during meals. I learned about this only when my spouse was admitted for several days due to suspected of food poisoning recently. Kudos to the management of Pantai Hospital Penang for choosing Hup Seng as its biscuit provider. I do not know if other hospitals of the Pantai group in Malaysia are using Hup Seng too. Imagine if they are also using Hup Seng biscuits, definitely it must be a big regular business for Hup Seng.

The writer himself also a shareholder of the company, is confident that Hup Seng will reward shareholders with at least another final dividend of 15 sen most probably on April 2014. If that is the case, then the total dividend for 2013 will be 30 sen and the current price of Hup Seng at RM5.20 would mean its dividend yield is a commendable 5.7%!

Once again, a big applause to the Pantai Hospital Penang for choosing Hup Seng biscuits. The management definitely knows how to choose tasty and quality biscuits for its loyal patients!