UMediC Group Bhd (UMC) is a hot IPO which is going to be listed on ACE Market on 26 July 2022. The group’s shares offered to the public were oversubscribed by 46.8x while the shares offered via placement was fully placed out. What has caused this IPO oversubscribed? Do you realize that UMC looks similar to UWC? Do they have any relationship with each other? Will UMC transform into another UWC in the future? Let us look into it together.
Background
UMC is headquartered at Batu Kawan in Penang and It was formerly known as UWC Healthcare Sdn Bhd, where they started to distribute dental products. Since then, they have evolved and become the manufacturer of ICU bed, manual bed, hydraulic stretcher, emergency & medical cart, prefilled humidifier, prefilled nebuliser and many more.
The group has an established track record and reputation of around 20 years of cumulated market presence. UMC has also expanded its customers network to include overseas markets in over 30 countries globally. UMC has 6 subsidiaries, which are currently 100% owned by UMC. In the meantime, UMC and UWC have the same founders, who are Dato Ng Chai Eng and Lau Chee Keong. Both of them own 68.5% shares of UWC and own 61.7% shares of UWC.
Business Model
UMC is involved in marketing and distribution of various branded medical devices and consumables.
- Marketing and distribution (82.9% of FPE2022 revenue)
UMC is an authorised distributor of medical devices made by internationally recognized companies such as Philips, Mindray, General Electric and Merit. The group offers after sales services such as maintenance, technical support, as well as training related to equipment and medical consumables. Its products are distributed to more than 400 customers comprising public and private hospitals, other healthcare services providers, as well as non-medical business entities. - Manufacturing (17.2% of FPE2022 revenue)
UMC is involved in manufacturing of its own medical consumables, namely HydroX series pre-filled humidifiers and AirdroX series inhaler spacers. The group’s HydroX humidifier is very convenient to replace, so its sales are very good. The HydroX series has the Halal certification and it was successfully sold to many countries such as Thailand, Indonesia, the Philippines, India, South Korea and so on.
However, the group’s AirdorX has not been officially mass produced. Perhaps, after the group confirming the demand of this product in the future, they will invest more funds to increase production. Furthermore, UMC works with its tendering agents such as Customer A, who are actively participating in local public sectors. They engage the tendering agents on a non-exclusive basis, which there are no commissions paid to them. UMC is not dependent on any of them.
Details of the Use of Proceeds
UMC plans to utilise 33.1% of the IPO proceeds of RM31.1mil for construction of new factory building and new M&D offices set up, 28.9% of the proceeds for repayment of bank borrowings, 27.8% for working capital, while the balance for listing expenses.
Major Customers in FYE2021
There are 5 major customers in FYE2021, namely Customer A (participate in government projects bidding for medical equipment), Customer H (Organization under the MoH), Customer D (Authorised distributors of prefilled humidifiers), Customer I (Ventilators) and Customer J (Prefilled humidifiers). UMC’s major customers contributed approximately 42.75%, 33.2%, 35.3% and 27.3% to the group’s total revenue for FY2019, FY2020, FY2021 and FPE2022 respectively. For FYE2021, UMC has more than 400 customers. As such, they are not dependent on major customers due to large customer base.
Key Financials
- Revenue
FY2021 revenue rose 44.1% YoY, on the back of Covid-19 pandemic, as well as the replacement and upgrading of medical devices. The growth was mainly attributable to higher sales from the marketing and distribution segment (82.9%), particularly on ventilators, patient monitors, automated ultrasound machines to both public and private hospitals.
Positive growth was recorded in its manufacturing segment (+12% YoY) following the increase in sales of the HydroX series of pre-filled humidifiers.
The group’s 1H FY2022 revenue of RM36.9mil has surpassed its FY2021’s revenue by 8%, thanks to the upgrading and expansion of healthcare facilities which boosted its medical devices sales. There is also a significant increase in its manufacturing revenue (+193% YoY) from higher sales of HydroX series prefilled humidifiers. - Net Profit
In terms of net profit, the company has achieved a net profit of RM1.3mil in FY2019, RM2.4mil in FY2020, RM5.1mil in FY2021 and RM4.6mil in FPE2022, respectively. - Net Cash from Operating Activities
In terms of cash flow from operating activities, the company’s FYE 2019 to FPE 2022 are RM6.7mil, (RM3.9mil), RM3.7mil and RM9.7mil respectively. The negative net cash used in operating activities was mainly caused by increased orders as they purchased more equipment and parts due to Covid-19. However, UMC has a gearing ratio of 0.99x before the IPO fund raising. After the completion of the fund raising, the company set aside RM9mil to repay their bank loans (total debts: RM14.4mil). So going forward, their gearing ratio will be reduced.
Prospect
Construction of new factory building, which includes building a single storey production floor and a storage area with a built-up area of approximately 35,000 square feet. The new single storey factory building is expected for commencement in the 2H2024 which can house up to 2 production lines for the upcoming new products such as sterile water for inhalation, digital oxygen flowmeters, prefilled nebulisers and humidifier humidity sensor.
Strengthening its domestic presence and reach. The group intends to set up a new M&D office each in KL and Johor as for showroom and service centres purposes which allows the group to tap into the potential business opportunities offered in these locations.
Development and commercialisation of new products under its own brand. New products set to be commercialised in the next two years include sterile water for inhalation, prefilled nebulisers, digital oxygen flowmeters, and humidifier humidity sensors.
Expanding its product portfolio through the development of current and new brand distribution business. As appointed distributor for international brand owners and manufacturers, namely Philips, Mindray, GE and Merit, the group is able to source medical devices in different specifications, price ranges and features directly from them in order to fulfil the different requirements of their end customers including private and public hospitals, other healthcare service providers, as well as non-medical business entities.
Risk Factors
The key risks for the group include slower than expected expansion plan, fluctuation in foreign currency and non-renewal of regulatory license and distributorship agreements.
Fundamental Analysis
Market Capitalization:RM110.65mil
Number of Shares:119.65mil
Earning per Share: RM0.013
PE Ratio:23.5x
2-years Revenue (CAGR): 44.1%
2-years Profit After Tax (CAGR): 96.4%
Please like and follow our FB page to get more updates from us. Thank you. 
𝐃𝐢𝐬𝐜𝐥𝐚𝐢𝐦𝐞𝐫:
The research, information and opinion expressed in this article / video are purely for information and educational purpose only and should not be construed as investment advice. We will not be liable for any losses or damages suffered from your investment decisions. Kindly consult a licensed investment advisor if you wish to get any investment advice.
Open a Stock / Futures trading account in Malaysia: https://bit.ly/3dX157y
🍁 Facebook: https://www.facebook.com/mywealthfort
🍁 Instagram: https://www.instagram.com/mywealthfort/
🍁 Telegram: https://t.me/mywealthfort
🍁 YouTube: https://www.youtube.com/lifechamp
🍁 Website: https://www.mywealthfort.com/
More articles…
