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What Investors Should Know About UG Healthcare Corporation Ltd’s FY2018 Earnings

UG Healthcare Corporation Ltd (SGX: 41A) is a disposable gloves manufacturer which markets and sells its own gloves under the brand, Unigloves.

Yesterday, the company released its financial results for the full year ended 30 June 2018 (FY2018). Let’s look at the highlights from the announcement.

Show me the money

Revenue for the year improved 19.7% year-on-year to a record S$78.1 million, up from S$65.2 million a year ago. The improvement was primarily due to higher production and sales of gloves on the back of increased gloves demand.

Gross profit grew 32.1%, from S$9.7 million in FY2017 to S$12.8 million in FY2018. As a result, gross profit margin rose from 14.8% to 16.4% mainly due to lower raw material prices and increases in production volume and manufacturing capacity.

Net profit was up from S$2.4 million in FY2017 to S$4.3 million in FY2018, surging 77.4% year-on-year. The higher revenue and gross profit margin, as well as an increase in foreign exchange gain, helped to improve the bottom line. Consequently, basic earnings per share grew from 1.28 Singapore cents to 2.26 cents.

UG Healthcare’s balance sheet weakened for the year. As of 30 June 2018, the disposable gloves manufacturer had S$6.7 million in cash and bank balances, and S$26.8 million in total debt. This translates to a net debt position of S$20.1 million. In comparison, at the end of June 2017, it had S$15.3 million in net debt.

The company had no cash flow from operations to speak of in both FY2018 and FY2017. However, it had lesser operating cash outflow of S$0.4 million in FY2018, compared to the outflow of S$7.1 million a year ago.

In FY2018, UG Healthcare built a new production facility and started partial commercialisation of Phase 1, which comprises additional capacity of 500 million gloves per year. This phase is expected to be in full commercialisation by October 2018.

The company also acquired a new distribution subsidiary in Brazil in May 2018, allowing it to “make further inroads in South America, where there is growth potential”.

Lee Jun Yih, executive director of UG Healthcare, commented on the company’s latest results:

“We are encouraged that our concurrent efforts in realigning our manufacturing operations and expanding our downstream distribution network are paying off, resulting in higher production efficiency and fuelled four consecutive quarters of earnings growth.

We believe the additional production capacity of 500 million gloves per annum that we have started commercialisation in stages, will further enhance the efficiency of the overall manufacturing business. We expect the higher productivity in our own brands of gloves that are marketed through our own downstream global distribution network, will allow us to increase our market penetration and serve our customers more effectively.”

Ka-ching!

The board is recommending a first and final dividend of 0.235 Singapore cent per share for FY2018. Shareholders can choose to receive the dividend in scrip or cash. UG Healthcare did not pay any dividend in FY2017.

What the future holds

UG Healthcare is planning to increase its gloves production by another 300 million gloves per year in Phase 2, bringing the group’s total capacity to 3.2 billion gloves per year.

Lee said that the macro uncertainties should remain and thus, could have an impact on raw material prices and currencies. He added:

“We are, however, cautiously optimistic as we continue to drive growth through our value chain and essential gloves products for all our end users on hygiene and protection against contamination.”

Yesterday, UG Healthcare shares closed at S$0.23 apiece. This gives a price-to-earnings ratio of 10 and a dividend yield of 1.0%, based on the latest data.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.