KUALA LUMPUR (Oct 2): UWC Bhd (KL:UWC) rose to a fresh high on Friday as analysts flagged upside for the engineering services firm from Southeast Asia’s rapidly growing semiconductor supply chain.
UBS initiated coverage on UWC with a “buy” rating and target price of RM8.25, noting the company’s meaningful exposure to key wafer fabrication equipment (WFE) contract manufacturers that stand to benefit from their rapidly growing supply chain in Southeast Asia.
“We believe UWC is well positioned to capitalise on Southeast Asia's rapidly growing WFE supply chain, given its meaningful investments in building capacity and technical capabilities,” UBS said.
Shares of UWC rose as much as 49 sen or nearly 7% to RM7.59. The stock ended Friday at RM7.57, valuing the Penang-based company that makes precision parts at over RM8 billion.
UWC had rallied more than 80% so far this year thanks to robust earnings growth amid a boom in artificial intelligence that has triggered an unprecedented surge in demand for WFE, as manufacturers race to build the advanced microchips required.
UBS is forecasting a 70% average annual earnings growth over the next three fiscal years for UWC, reflecting “our positive view on UWC's ability to grow its wallet share with key WFE customers”.
Rising demand for central processing units and digital signal processing chips is expected to drive further capacity expansion at Taiwan Semiconductor Manufacturing Co, the world's largest semiconductor foundry, CGS International said.
The expansion could support additional WFE spending, “ultimately benefitting UWC’s customers”, the research house said.
CGS International reiterated its “add” call on UWC and a target price of RM9.13, justified by strong growth outlook, supported by its "high-quality customer base across WFE and backend testing".
The consensus is unanimously bullish on UWC with all nine research houses assigning a “buy” call on UWC. The average target price is RM8.41, according to Bloomberg, indicating a potential upside of 11% from its last price.