UG Healthcare Corporation Ltd: is it a good buy?

UG Healthcare (8K7.SI) is a Malaysian company founded in 1989 that is listed in the Singapore stock exchange. It is a glove making company that specialises in Nitrile and latex glove under the brand “UniGloves”. These gloves are distributed worldwide including in US, Europe and Asia. Is UG healthcare a buy now at $0.61?

Let’s look at the revenue. UG has a revenue to 144.2M in 2020 and a net income of 13.4M. This represents more than 50% increase in revenue form 2019 and more than 400% increase in income from 2019. While having increase revenue is not surprising given the increase in demands for gloves during the pandemic, the higher proportionate increase in income tells us that UG is being increasingly profitable. In fact, the net profit margin is a 9%. Which is a very good percentage for glove makers. This is likely due the the fact that UG sells it’s glove as it’s own brand and are selling ‘higher end’ gloves including nitrile gloves.

Now let’s look at the other parameter. The Price to Earning Ratio (P/E ratio) is at 3.7X. This means that the price of the stock is merely 3.7x the annual earnings. While this is an excellent ratio, investors must take note that earnings is likely to fall this year as the pandemic comes under control and more competitors enters the glove market.

The Price to book ratio (P/B ratio) which simply means price of stock compared to assets is is 2.9x which is a good ratio as well.

UG has a debt to equity ratio of about 8%, which is a healthy number. That means that the company is not laden with debt, which put it in good stead for future growth.

UG is not known to be a high dividend paying company. In 2020, their dividend rate was only 0.39%. So buy this stock for growth, not for dividend.

All in all, UG healthcare has good fundamentals. It’s earning is likely to be challenged over the next few years, but it is likely to retain a good market lead over the long term. I believe the share price would likely fall slightly to the range of high 50+ cents in the next 1 year, that’s where I will personally start collecting the stock.

Tilt Lee
The above represents my personal opinion only. Investment is a personal choice, read and learn and invest wisely.

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