KENANGA values United U-Li Corporation Bhd at RM2.15, in line with the FBM Small Cap Index, as it is a dividend stock with growth potential.
U-Li is a leading cable support system manufacturer and a supplier of integrated ceiling system and light fittings products. The company is poised to benefit from the resolution of its shareholders’ dispute and current capacity expansion plans.
The stock is currently trading above its five-year forward average price earnings (PE) of 6.3 times. However, a valuation re-rating is warranted as U-Li is a rejuvenated entity with exciting growth prospects.
“Furthermore, there are indications of a generous dividend payout in the future given its strong cash coffers. Assuming a dividend payout ratio of 50 per cent, U-Li could offer decent yields of four to six per cent,” said Kenanga in its research notes.
Kenanga said it was not all smooth sailing for U-Li as the company experienced a muted growth phase which lasted for four years (from 2007 to 2010), dragged down by a family/shareholders dispute.
Consequently, the business was adversely affected and was not positioned to achieve its potential. However, with the disputes finally resolved, the management is now able to concentrate on spearheading U-Li into the next phase of growth.