UCHITEC

Just a month ago, Uchi Technologies Bhd's (Uchitec) share price was hovering around RM1.80 for about 2 weeks and started to climb when April comes. Today, its share price is RM2.33, an increase of RM0.53 or 29.4% in a month.

Uchitec manufactures electronic control modules for various consumer appliance companies. Uchitec has expertise in electronic manufacturing services and is committed to product quality and timely delivery. Their clients include Moulinex, Phillips, Jura, Krups, AEG, Bosch, Siemens and Blaupunkt.

Today, SJ Securities initiates a buy call by giving an overweight recommendation. Based on the prospective EPS of 22.2 sen, SJ Securities have fairly valued Uchitec at RM2.89, pegging on a PER of 13x. SJ Securities think that Uchitec deserves a premium valuation because of its large market share and advanced technology. The stock is attractive with a high dividend yield of 8.9% and ROE exceeding 40%. For more information, go to Bursa's website to download their report.

Technically, when price advances 30%, it is deemed "overbought" in the short term and a pull back is expected. It seems to me that the "overweight" recommendation has been already discounted in the current price. The share price have been in a down trend since June last year and is clearly defined by a down trend line (Blue line R1 on the chart below). It is also being resisted by the 90 day long term moving average (Red line R2 on chart below).

With an overbought value and price near resistance, a pullback to at least RM 2.05 is expected. Price is expected to be supported at this level and if price falls below this level, then we are looking at a down trend continuation.


Uchitec Daily Chart as at 15 April 2008. Chart from NextVIEW Advisor

Article by Benny Lee