Monday, February 27, 2006

ROI on Uchi: Part II

Regarding the growth issue for Uchi, yes, i have explained it rather in a simplistic manner.

Some folks actually use a more complex (and since it is more complex, it is pretty subjective... LOL.... and more confusing!) measuring such as the CAGR yardstick or the Compounded Annual Growth Rate.

Why is it complex and subjective?

Well.... let me say this... a company's compounded annual growth varies and each starting point of reference will yield a different interpretation.... err... complicated, eh?

For example... take the computation of Uchi's CAGR since 1999. Net profit then was 19 mil. For fy 2005, Uchi's net profit is now 73.578 million. Number of years = 6. Using one of them business calculators (simple lor - no need complexity), with a couple of clicks here and there, we get Uchi's CAGR since 1999 = 25%. Awesome, eh?

Now if say we take the computation of Uchi's CAGR since 2001. Uchi's net profit in 2001 was 37 million. Uchi's net proft in 2004 was 63 million. Number of years = 4. So Uchi's CAGR since 2001 = 18.76%. Err...not as awesome as since 1999. Can we interpret it and say that the last 4 years, Uchi's profit growth was not as strong?

And of course if we do a y-o-y comparison... Uchi's net profit in 2003 was 59 million. So Uchi's net profit only 'growed' 7% in fy 2004. And for current fiscal year, fy 2005, Uchi's net profits grew 17%.

Which is why i say this growth and the CAGR is pretty subjective. Depending on the starting point of reference, each year will likely to yield a different CAGR.

Ahhh.... the complexity in using numbers and yardsticks.... !!!!!!

Anywayyyyyy..... from a business perspective.... what's our most important evaluation/assessment of Uchi's growth? How are we going to review such a performance?

Again... this is where it gets subjective..... :)

For me... i would say that Uchi has a business which showed an impressive growth over the last 6 years. However, the last couple of years, as in the laws of growth (ie nothing can grow at a robust rate forever), Uchi's growth has slowed. However, the biggest plus is the strong and impressive improvement in Uchi's net profit margins. This would suggest to me that the management is making an effort to increase profit to overcome the slower growth in its business. This would be my assessment... which of course is very subjective on this part....

what about urs?

Does it pass or fail to meet your assessment that Uchi remains a good business investment? ie... do we STILL want to own and be a partner in such a business?

Ok.. let me flip this around... and use a trader's perspective on this matter. Now I am very lucky that this terror trader dude Liam was willing to share this comments with me before. :p (So I hope he won't mind me sharing his comments here... :p)

  • Altho' earnings growth has peaked and no more returning 12% per annum BUT financials and margins are still great, is there a problem?
    Wouldnt it come a time when every biz would have to go thru a consolidation cycle? The fact that growth has slowed but if amply compensated by higher revenue translating into better financials, isnt it a stock worth holding?
    An analogy from a trader's perspective, after a spike in price, a stock usually consolidates at a certain range - this is a price range where an equilibrium of buyers and sellers can agree to trade. Now, the next phase of movement will then be dictated by whether the buying or selling is greater than the other and u then take appropriate action.
    Do i sell into a consolidation? No, I dont. Any similarities here?

Some MORE issues to consider eh?



hhc1977 said...

hi nm,

Just my 2 sen.

Yes, somehow, somewhere good things must end. But, do we really have to put the horse before the cart in anticipating since Uchi has grown so nicely for so many years, it shud slow down or even reversed. This doesn't mean that we shud be the same biz partner through thick and thin. remember stock is for trading and wife is for keep.

For me, as long as there is no significant deterioration in biz funda and no skyward valuation in share price, the best strategy is to stay put and wait for next course of action.

AS for the TA, if u look at the Uchi tech price chart, it's in a very long up trend action lasted more than one year. Even though there are some divergence along the way, there is still no big correction whatsoever. For those who expect it to go down due to multple div, they will be truely disappointed.

Why dont u publish yr famouse excel financial stat for this uchi?

Anonymous said...

Hi nm taikor
For the profit margin, do take note of the tax exampted for their R&D.
But even taking this tax examption into consideration, Uchi's net profit margin still very attractive.
Yes, the 15% ESOS is a red flag, but they also proposed share buy back up to 10%.
For me, I will still hold on.

Moolah said...


Having a share buyback along with the ESOS is what's really disgusting!

Think about it dude.

hhc1977 said...


FOr Public company, there is more than just rewarding shareholder. In every PLC, there are shareholders, workers and customers. A striked balanced between rewarding all of the sectors are more sustainable than just rewarding shareholers.

ESOS is just another way to reward/ motivate key personnel in PLC to create more value for the company. IN the long run, if ESOS is implemented correctly (there is always abuse), all 3 parties will walk out the deal happily.

ESOS per se is not evil, it is the implementation which is critical. For those of u who are not familar with Bayan Lepas Free Industrial zone (aka electronic firms in Penang), ESOS is part of the way to retain talent.

For MNC from US, they lavishly reward its key employee with option whihc make quite a number of millionaire here.

Moolah said...


I do understand the point of ESOS and all why ESOS is useful...


you have to understand ... me... my point of view... as a minority shareholder.

So does the ESOS benefit the minority shareholder?

No it does not.

Moolah said...


You have known me for a while already... and all this while.. u know very well my stance on ESOS.

So I do not see why views on it should change just because of Uchi.

hope u understand hor...