UMS Holdings Limited(SGX: 558) announces that its third quarterly revenue has grown to S$100 million by 48.1% for 2022 on a quarter-on-quarter basis.
The quarterly net profit is up to S$43.9 million by 173%. UMS declares an interim dividend of 1 cent per share to its shareholders.
The group chairman, also the chief executive officer, Mr. Andy Luong, is optimistic about the outlook for the next 6 months as the demand is robust due to a considerable backlog from its key customer.
Is UMS Worth Buying?
UMS share price has undergone sell-offs, reaching a trough of S$0.865 on October 17 this year but rebounding to S$1.25, more than 45% up. However, it still lags behind the peak of S$1.44(last closing price) obtained on January 10, 22.
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About UMS
UMS, a public-listed corporation on the Singapore Stock Exchange with a market cap of S$803 million, is an investment holding company participating in providing equipment manufacturing and engineering services to original equipment manufacturers of semiconductors and related products.
3 of the company’s segments of UMS holdings ltd create primary business activities: semiconductor, aerospace, and others.
The semiconductor segment provides precision machining components and equipment modules for semiconductor equipment manufacturers, complex electromechanical assembly, and final testing services. The aerospace segment offers precision machining services for the aerospace, electronic and automotive industries. The Others segment offers water disinfection systems shipment, non-ferrous metal alloys trading, machine sales, and customized cutting tools.
Share price
The table below illustrates UMS’s closing prices and returns.
| UMS share prices | Nov 17, 2022 | Returns |
|---|---|---|
|
S$1.4695 (Dec 31, 2022) |
S$1.25 |
-15% (year-to-date) |
|
S$1.4885 (Nov 18, 2021) |
S$1.25 |
-16% (year-on-year) |
Dividends*
The table provides dividend stocks details below.
| UMS Holdings Limited | 2017 | 2018 | 2019 | 2020 | 2021 |
|---|---|---|---|---|---|
|
Trailing dividend per share |
S$0.04 |
S$0.04 |
S$0.04 |
S$0.04 |
S$0.03 |
|
Trailing dividend yield |
4.12% |
7.89% |
3.40% |
4.17% |
2.24% |
*The market data are attributable to Morningstar.
Dividend Payout Schedule*
The table below summarizes information about UMS’s dividend payout dates.
| UMS Holdings Limited | 2018 | 2019 | 2020 | 2021 | 2022 |
|---|---|---|---|---|---|
| Payable dates |
|
|
|
|
|
*The market data are attributable to Morningstar.
What do Analysts Say?
Maybank Research
- Maybank upgrades UMS from HOLD to BUY.
- UMS’s record performance for the 3rd quarter of 2022 exceeds consensus and estimates. Its PATMI(profit after taxes and minority interest) has reached a 88% of Maybank’s profit forecast for the past 9 months.
- Maybank is optimistic about UMS’s outlook for the next 6 months due to a large backlog from its key customer. The management believes comments about lower forecasts by its key customer will not affect its performance.
- UMS predicts that it will accelerate its production in the middle of 2023 with the completion of the new Penang factory of 300,000 square feet in 2022 yearend.
- The management believes a new client(in discussion) will fully cater to the new plant’s production capability and increase the company’s revenue and PATMI.
- Therefore, the research expects a robust 4th quarter of 2022 and the whole year of 2023.
- Maybank raises 2022’s estimate of the PATMI to 13.4% and 13.8% and the target price from S$1.2 to S$1.34 but lowers the P/E(price-earnings ratio) from 8,5 to 8 for 2023.
CGS-CIMB Research
- CGS-CIMB remains bullish due to UMS’s performance exceeding expectations.
- The semiconductor segment records an extraordinary revenue growth of 49.9% yearly. The integrated sales have registered a 103.2% growth and 181% net profit for the 3rd quarter of 2022, well above its forecasts.
- Gross material margin for the 3rd quarter is lower by 50.5% than 54.4% due to higher material costs. However, UMS benefited from the reversal of the tax provision by the Malaysian government’s resolution of the pioneer tax incentives. The company sees an amount of S$11.9 tax credit in its net profit for the quarter.
- UMS is confident of the next 6 months despite factors like inflation, slower demand, and supply-chain disruptions.
- CBS-CIMB forecasts a revenue increase of 11.1% and 14.4%-15.7% for EPS for 2022-24.
- It, also raises the price per share from S$1.37 to S$1.57 based on the 2017-2022 averaged P/E of 10.1.
DBS Research
- DBS downgrades from BUY to Hold due to headwinds like rising interest rates, weaker demand, and geopolitical risks.
- UMS’s key customer, Applied Materials(AMAT), cut its outlook owing to export restrictions to China.
- DBS expects global demand for semiconductors to slow further in the coming months and years, leading to reduced capital expenditures for the industry.
- The Penang plant will appeal to customers diversifying production bases in South East Asia outside China.
- DBS raises 2022’s earnings by 15% but lowers revenue and earnings to 6% and 7%.
- The brokerage also lowers the target price to S$1.14 from S$1.83 and P/E to 9.
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Final Thoughts
UMS holdings limited has performed above analysts’ estimation for the past 9 months and believe it will continue for the remainder of this year. However, global headwinds like interest rates, demand, and geopolitical risks hinder the semiconductor industry, including UMS. Beginner Investors should not ignore the factors in investing.
Key takeaways
- UMS outperforms for the past 9 months of 2022.
- Analysts predict the same for the remaining time of this year.
- Investors should not ignore critical factors like interest rates, demand, and geopolitical risks.
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