Last Words On Uchi For Now

Interesting dialogue between Mohd Radzian and hhc1977 on the posting More Feedback On Uchi"

Let me say a few words again.

The main concerns for Uchi

1. Decline in earnings.
2. Decline in net profit margins.
3. Decline in cash balances.
4. Continued decline in dividends paid.
5. The integrity of the owners in rewarding themselved more in a much bloated ESOS

As it is, Uchi's potential yield in dividends based at a price of 84, does have its justifications, despite its lower dividends.. if

1. Uchi's dividends for total year is at least 9-10 sen.
2. The recession does not last longer than 8 months (would this time be ok, Radzian?)

Well the investment would pay off if the 2 points hold true.

Could it not go wrong?

The recession. This is synchronized global recession and there are some very strong arguments that it could last much longer.

And in the face of such a scenario, I have raised the issue again and again on Uchi's main products and look at its relevancy on the face of a global recession. What is the impact?

And without a shadow of a doubt, Uchi's products would hurt if the recession is prolonged and it's without a shadow of a doubt too that Uchi's earnings would be impacted.

Of course, some would be correct to point out that since Uchi's product is sold in USD and since the RM is much weaker against the USD, this should act as a buffer to Uchi's earnings.

However, some would also quickly point out the drastic slump in sales revenue. With the huge slump in sales, how good could profits be?

And if the decline in earnings continue, so would the share price.

And this is where the huge concern is. The dividends received could be good based at 84 sen but any potential gain could easily be reversed by the falling share price caused by declining earnings.

That's the concern.

Of course, a concern is just a concern. It might not happen and if it doesn't happen, the investor taking the bold investing decision to buy would be rewarded.

However, if the concern holds true, the prudent investor had just made the intelligent move by not being seduced by the dividend yields on the backdrop of a slumping earnings.