UUE has proposed a bonus issue of new shares, a free bonus issue of warrants, and the implementation of an ESOS. Proceeds of up to RM60.8m from the warrants and up to RM48.9m from the ESOS will be used to fund the Group’s working capital requirements and support diversification into the renewable energy sector, particularly in solar EPCC.
We are Mildly Positive on these corporate proposals. While the exercises are expected to dilute FY26F EPS by 41%, we believe UUE’s proactive approach in securing growth capital reflects management’s confidence in project pipeline and underscores constructive outlook for the solar segment.
We keeping our earnings forecasts unchanged at this stage, pending completion of the proposed exercises.
Maintain our BUY recommendation with an unchanged TP of RM1.09, based on 15x FY27F EPS of 7.3 sen and appraised with a three-star ESG rating.
Bonus Issue, Right Issue and ESOS. UUE has announced several corporate proposals aimed at rewarding shareholders and supporting future growth. The Group plans to undertake a bonus issue of up to 304.2m new shares on the basis of one bonus share for every two existing shares held. Following this, UUE will also issue up to 121.7m free warrants on the basis of one warrant for every five shares held after the completion of the bonus issue. The exercise price for these warrants will be set at up to a 10% discount to the 5-day volume weighted average price (VWAP) prior to the price-fixing date. In addition, UUE has proposed a new ESOS representing up to 10% of the total issued shares, with option prices to be determined at up to a 10% discount to the 5-day VWAP prior to the grant. All these proposals are expected to be completed by 4QCY2025. Moreover, the Group also intends to diversify its revenue stream into renewable energy, having already secured 22 small-scale RE projects with a combined contract value of RM1.9m.
Based on an indicative exercise price of RM0.50/warrant and RM0.47/ESOS option. Assuming full exercise of both, UUE could raise gross proceeds of up to RM60.8m from the warrants and up to RM48.9m from the ESOS options. The rationale for these corporate exercises is to reward existing shareholders, strengthen the company’s capital base, and support UUE’s diversification into the renewable energy sector particularly in solar EPCC and investments. On a pro forma basis, these exercises are expected to marginally improve UUE’s gearing ratio from 0.27x as of 28 Feb 2025 to 0.18x.
Table 1: Pro Forma Effects of the Corporate Exercises
Audited as of 28 February 2025 | After assuming full exercise of the Bonus and Warrants | |
RM'm | RM'm | |
| Share capital | 77.2 | 138.1 |
| Reserves | 35.9 | 35.5 |
| Shareholders’ fund/ NA | 113.1 | 173.5 |
| ||
| No. of shares in issue (‘000) | 608.3 | 1034.1 |
| Total borrowings (RM’000) | 30.9 | 30.9 |
| NA per Share (RM) | 0.19 | 0.17 |
| Gearing ratio (times) | 0.27 | 0.18 |
Source: Company, Apex Securities
Our Take. We are Mildly Positive on these corporate proposals. While the dilution in FY26F EPS to 3.08 sen may dampen short-term investor sentiment, the proposed bonus issue, warrants, and ESOS are expected to improve market liquidity and make UUE shares more accessible to a wider pool of investors. Meanwhile the Group’s foray into renewable energy signals a strategic move toward long-term diversification, however we believe the near-term financial contribution will be modest as current project values remain relatively small compared to UUE’s established core business. That said, UUE’s proactive approach in securing growth capital reflects management’s confidence in project pipeline and underscores constructive outlook for the solar segment.
Earnings revision. No change to our earnings forecasts as pending the completion of the exercise.
Valuation & Recommendation. We maintain our BUY recommendation with an unchanged target of RM1.09, based on 15x FY27F EPS of 7.3 sen and appraised with a three-star ESG rating. We continue to favour UUE for its (i) specialisation in HDD solutions, a high-margin niche, (ii) strong positioning as a key beneficiary of TNB’s grid upgrade plans, supported by its established relationship with major customers, and (iii) strategic expansion into subsea development, which is anticipated to drive future margin expansion.
Risks. Heavy reliance on its top three customers. Cost overruns. Inability to secure new contracts.
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Opinions, estimates and projections in this report constitute the current judgment of the author. They do not necessarily reflect the opinion of Apex Securities Berhad and are subject to change without notice. Apex Securities Berhad has no obligation to update, modify or amend this report or to otherwise notify a reader thereof in the event that any matter stated herein, or any opinion, projection, forecast or estimate set forth herein, changes or subsequently becomes inaccurate.
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| Currency | Buy Rates (RM) | Sell Rates (RM) |
|---|---|---|
| USD | 4.212042 | 4.248408 |
| EUR | 4.921000 | 4.929487 |
| CNY | 0.591903 | 0.592919 |
| HKD | 0.540309 | 0.544492 |
| SGD | 3.268153 | 3.293573 |