Ulicorp (7133) is an industrial product company listed on Bursa’s main market. Although Ulicorp has a track record of distributing dividend every year, the dividend yield is not consistent probably due to cyclic nature of the construction industry. Notably over the past three years (2021 to 2023), Ulicorp has shown an upward trend in dividend payouts, currently boasting a dividend yield exceeding 5% based on a dividend per share (DPS) of 8 cents last year and the current share price of RM1.46. As the construction sector gains momentum in the country, can Ulicorp see business growth and continue to offer attractive dividends to investors?
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Background of Ulicorp
ULICORP’s (full name: United U-Li Corporation Berhad), is a Malaysian company specializing in manufacturing of cable support system. It is listed on the mainboard of Bursa stock exchange (code 7133), categorized under “industrial products & services” sector.
Business of Ulicorp
ULICORP primarily generates its revenue through its cable support system, while also holding the exclusive distribution rights for the OPPLE LED brand from China. According to the most recent financial report ending in 2023, the cable support system accounted for 85% of ULICORP’s revenue and approximately 90% of its profit. This underscores the importance of ULICORP’s cable support system business to its overall prospects and financial performance.
What is cable support system (CSS)?
Cable support systems, including cable trays, ladders, and trunking, are components designed to support and organize cables within buildings, industrial facilities, and other structures. They are important to ensure compliant electrical installation in many industries. Ulicorp’s website here shown how cable support system looks like, and from their website page here, CCS is widely used in various commercial and industrial buildings.
Ulicorp is a major player in the cable support business in Malaysia. Based on the research report by Kenanga here, ULICORP has a dominant market position with a market share of more than 50% in the local cable support system space.
Bad years from 2018 to 2020
Ulicorp faced challenging years from 2018 to 2020, and while the pandemic did impact the company, its business fundamentals were already under strain before the global crisis. Management discussions in the annual reports attribute this period’s poor performance to several key factors:
- Project delays, holds, and cancellations stemming from changes in government and political unrest.
- The depreciation of the Malaysian Ringgit (MYR), leading to higher costs of raw materials.
- Intense competition within a market that was experiencing a softening demand.
Financials of Ulicorp
Net cash
Despite having some borrowings, Ulicorp maintains a net cash position, with net cash totaling RM93 million, equivalent to RM0.42 per share.
Margin
Following the challenging period from 2018 to 2020, Ulicorp has shown significant improvement in both its gross and net margins over the past three years.
| Year | Gross Margin | Net Margin |
| 2021 | 46.36% | 21.51% |
| 2022 | 36.42% | 15.24% |
| 2023 | 40.87% | 15.93% |
Dividend Policy and Payout
To my understand, Ulicorp does not have a dividend policy in place. Below is the record of dividend payout in the past 3 years. Ulicorp did not distribute dividends from 2018 to 2020 due to the company’s marginal profitability or loss during that period
- 2021: 19.77%
- 2022: 27.73%
- 2023: 42.17%
The latest quarterly result (2023 Q4)
In 2023, Ulicorp’s overall performance saw a slight increase with both its top and bottom lines remaining relatively stable compared to the previous year, showing a modest growth of 0.6% and 5.2% respectively. However, there’s a concerning trend in the net profit from Q2 to Q4, which has been on a downward trajectory. This decline isn’t favorable for investors, yet from historical data it seems fluctuations are common for Ulicorp, probably due to the nature of Ulicorp’s business and the volatility in raw material prices.
An example of this volatility is in Q1 and Q1 of 2023. The net profit was only 4.2 million in Q1, but it significantly increased nearly fourfold to 16.2 million in Q2. These fluctuations demonstrate the inherent unpredictability of Ulicorp’s financial performance.
Personal Opinion
ULICORP boasts a PE ratio of less than 8, coupled with a dividend yield exceeding 5% based on 2023 data. Additionally, it maintains a robust net cash position of RM0.42 per share and is currently trading below its net tangible asset (NTA), showcasing favorable valuation metrics across the board.
Coming to its earning prospect, from the beginning of 2024, there is a surge in construction contracts being awarded, a trend that bodes well for ULICORP, especially given its dominant market share of over 50% in the local cable support system market. Its products are primarily utilized in commercial and industrial projects rather than residential projects. From project references available from company website here, ULICORP took part in many well-known local projects, such as many first tier shopping malls in Klang Valley, LRT, MRT, Pengerang (Oil and Gas) etc. ULICORP is also a potential beneficiary of booming renewable energy and data center projects in Malaysia. With its high correlation with the construction sector, there is potential for Ulicorp to ride the wave alongside with the construction sector.
To know more about dividend investing, feel free to check out my article about ultimate guideline for dividend investing here.
Disclaimer: This article is purely my notes from studying this company. This is not a BUY or SELL call. I am not a registered investment advisor nor an investment guru, please be reminded to do your own homework and invest at your own risk.