UniVision Engineering Ltd: Covid-19 pandemic aggravated the challenges in H2 FY20 following the heat of protests in Hong Kong in H1 FY20.  

UniVision Engineering Ltd (LON: UVEL) is a FTSE AIM All-Share index listed Company, which is involved in supply, design, installation, and maintenance of CCTV (closed-circuit television) and surveillance systems.

Rationale for Valuation

FY20 performance is expected to be substantially lower than FY19. The continually evolving Covid-19 crisis can keep on hindering the UniVision recovery. On technical front, 14-day RSI is currently close to the overbought zone, which means there is a likelihood for a short-term correction in the stock price.

Upcoming Event: In early September, the Company is expecting to announce the final results for FY20 (ended 31 March 2020).

Recent News

23 June 2020: The Company announced the appointment of two executive directors - LI Keu ng Hung and CHAN Chi Hung, with effect from 24 June 2020. Mr Chan will also serve as the Chief Operations Officer.

Trading Update (as on 3 July 2020)

As per the last update released in December 2019, UVEL reported the reduced revenue and margins in H1 FY20 (vs H1 FY19) due to protests against the anti-extradition bill in Hong Kong. In H2 FY20, the effects of Coronavirusfurther hindered installation plans and dimmed the expectations of projected recovery in the second half of the financial year. Although unaudited revenue and profits in H2 FY20 shown recovery as compared to H1 FY20, the Company expects to report FY20 results substantially lower than the FY19.

Current Trading: The trading in FY21 has started well with the limited disruption caused by COVID-19. The Company has won new contracts which shall help in returning to growth in the current financial year.

One Year Share Price Chart


1-Year Daily Chart as on 24 August 2020, before the market closed (Source: Refinitiv, Thomson Reuters)

Key Risks

The anti-extradition bill in Hong Kong has significantly impacted the construction revenue. The increased financing cost amid Covid-19 uncertainties can lead to credit and liquid risk.

Conclusion

The Company can have opportunities for growth in the long run with a high level of demand for public security, high definition security and surveillance system. However, the performance was significantly lower in FY20 than FY19, and uncertainties of contracts amid Covid-19 conditions raising doubts over the outlook. In order to navigate the uncertain period and smoothly operate the MTR Corporation’s contract, it has increased the bank facility with HSBC, including the extension of trade facility to HK$26 million. Stock's 52 weeks High is GBX 2.99 and Low is GBX 0.911. From the technical standpoint, 14-day RSI is currently close to the overbought zone, which means there is a likelihood for a short-term correction in the stock price.

Based on the risks associated and factors as discussed above, we have given a “Sell” recommendation on UniVision Engineering Ltd at the current price of GBX 1.25 (as on 24 August 2020, before the market close at 12.20 PM GMT+1).
 
 
*All forecasted figures and Industry information have been taken from Refinitiv, Thomson Reuters.

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