UMS Integration reports 10% y-o-y increase in 2QFY2025 earnings of $10.3 mil Malaysia sales up 270%

 

SINGAPORE &ndash UMS Integration has become the first Singapore Exchange mainboard company to secure a secondary listing on Bursa Malaysia, marking a milestone for cross-border listings in the region.

 

Shares of the precision engineering firm began trading on the main market of Bursa Malaysia at RM5.15 on Aug 1, up from its listing price of RM5.

 

Some 6.1 million shares changed hands, compared with the 10 million shares listed on the exchange by way of introduction. No funds were raised for the company or its current shareholders.

 

The stock closed at RM5.50, giving a market capitalisation of RM3.9 billion (S$1.2 billion). It was among the top gainers on the Malaysian stock exchange on Aug 1.

 

UMS shares closed at $1.53 on SGX on Aug 1. The stock has risen by more than 45 per cent since the start of the year, taking its market capitalisation north of $1 billion.

 

UMS makes components and modules for manufacturers of semiconductor and aerospace equipment, as well as factory automation equipment.

 

In 2024, it expanded its manufacturing capabilities with the acquisition of 235,000 sq ft of leasehold industrial land in Penang, Malaysia, for RM15.2 million.

 

In a statement, chief executive Andy Luong noted that the company&rsquo s secondary listing in Malaysia will allow it to broaden its investor base, improve trading liquidity via separate trading platforms, and provide flexibility for it to access different equity markets in future fund raising. Mr Luong added that opportunities are emerging for the company to produce high-precision components for advanced packaging solutions.

 

&ldquo UMS is moving up the semiconductor value chain. We aim to expand our role and deliver higher-value precision components to our customers,&rdquo he said in the statement.

 

UMS is not the only semiconductor-related firm looking to list in Malaysia.

 

The company&rsquo s SGX-listed peer, Grand Venture Technology (GVT), had announced plans in September 2024 to pursue a secondary listing on Bursa Malaysia. It received approval from the Securities Commission Malaysia for the proposed listing in March. 

 

However, GVT has since received an offer from Dutch firm Aalberts Advanced Mechatronics to privatise the company for 94 cents a share, or a total of $318.9 million.

 

Shareholders who collectively hold 64.24 per cent of GVT&rsquo s total shares have given the offeror irrevocable undertakings to vote in favour of the scheme, the companies said on July 10.

A new plant, as well as new and upgraded machinery, has positioned it to ride the wave of the semiconductor boom

 

[SINGAPORE] UMS Integration : 558 +0.66% expects to see in the next few years the fruits of the S$120 million investment it made over the past three years, as it rides the semiconductor boom.

 

Having made the capital expenditure, the Singapore-listed company, that had a secondary listing recently on Bursa Malaysia, might be able to reward shareholders with more dividends if it continues to generate healthy cash flows.

 

UMS is primarily focused on the semiconductor industry. It manufactures high-precision, front-end components and performs complex electromechanical assembly and final testing services for customers that make the machines to produce wafers. 

 

It has production facilities in Singapore, Malaysia and California, with Singapore focused on high-end engineering and Malaysia on high-volume manufacturing. 

 

Andy Luong, UMS Integration controlling shareholder and chief executive, said the internally funded investment on a new plant and machinery &ndash to buy new units and upgrade older ones &ndash is beginning to bring in new revenue.

 

An American semiconductor player became UMS Integration&rsquo s second chip customer, and is being served by the manufacturer&rsquo s new plant in Penang after the customer expanded to Malaysia.

 

Bold move

By planning five years ahead, UMS Integration was well-positioned to ride on an industry upturn and stay ahead of the competition, pointed out Luong, an American citizen with Singapore permanent residency.

 

Its bold investment, made even before it landed orders, prompted a machine vendor &ndash from which UMS had bought several units costing 1.4 million euros (S$2.1 million) each &ndash to ask if the Singapore group would secure adequate deals to support the use of these machines.

 

&ldquo I said &lsquo If you have the machines, the work will come. If you don&rsquo t have the machines, the work won&rsquo t come&rsquo ,&rdquo recounted Luong. 

 

&ldquo Based on my 35 years in this industry, I understand (the ways things work), and also have done enough research to be proactive. 

 

&ldquo You basically (have to) be prepared, and the customer will come to you. Customers will work with a supplier that is willing to invest, and we are one of (those) that are willing to invest in automation and in high-end machinery.&rdquo

 

The proactiveness paid off when a customer recently asked Luong if UMS Integration has the capacity for more orders. 

 

&ldquo The customer WhatsApped me every other hour they desperately wanted me to expand capacity. When I said I have the machine, I have purchased it, the customer responded: &lsquo Wow, that&rsquo s wonderful!&rsquo &rdquo Three months ago, they might not have known there would be such demand, he added.

 

The unexpected orders were likely fuelled by the reversal of the US ban on selling chips to China.

 

Had UMS Integration not purchased the machines well ahead of demand, and ordered a unit today, the company would have had to wait for 1.5 years for it to be delivered. Similarly, it would have taken 2.5 years for a plant to be built. It is not like going to furniture retailer Ikea and just picking something up, quipped Leong.

 

Eyeing more growth

Currently, UMS Integration still has room to ramp up capacity. In 2024, it bought a 235,000 square feet, 60-year leasehold industrial plot next to its factory in Penang, Malaysia, for RM15.2 million (S$4.6 million).

 

It will possibly serve the company&rsquo s next big customer. However, should the leading Dutch semiconductor equipment maker ASML set up a plant in Malaysia, as per some media reports, UMS Integration is aiming to add it to its blue-chip clientele.

 

This is one of its ways to address customer concentration risks, as its top customer   has contributed as high as 74.9 per cent to its revenue in recent years. Other ways by which it has diversified include its acquisition of JEP Holdings : 1J4 0% before the pandemic hit, and providing precision-machining and engineering services to a different market &ndash the aerospace industry.

 

The demand for artificial intelligence and 3D semiconductors, meanwhile, is expected to unleash a rush of orders for components in the next two to three years, which bodes well for UMS Integration&rsquo s future. 

 

Given that it has already made the necessary investment, the group might now be in the position to up the reward to shareholders, observed Luong. As it has no borrowings, the revenue it generates would not go to service debt.

 

&ldquo Because I have already invested S$120 million, I now have more money in the bank account, so I can (pay out) more (as) dividend. That is, provided we will generate a lot more cash in the next few years.&rdquo

 

UMS Integration distributes dividends every quarter, with no fixed payout ratio. It distributed S$0.01 per share for the first quarter of the 2025 financial year ended March, lower than the S$0.012 for the corresponding quarter of FY2024.

 

Net profit was flattish at S$9.8 million for Q1 FY2025, while revenue rose marginally by 7 per cent year on year to S$57.7 million. The semiconductor business accounted for 84.3 per cent of the revenue, while the aerospace segment contributed 10.7 per cent. 

 

It is a net cash company, with S$81.9 million in cash against S$67.2 million in total liabilities &ndash the bulk of which were trade payables &ndash as at end-March.

 

The share price of UMS Integration has risen 50 per cent in the year to date, closing at S$1.53 on Friday (Aug 1), while its market value reached nearly S$1.1 billion.

 

UMS Integration has fortunately been spared from the turbulence surrounding the US&rsquo tariffs on its trading partners. This is because the company serves local customers. It trucks the bulk of its products from its Malaysia and Singapore plants to its top customer located across from its headquarters in Changi, while its Penang plant ships its products directly to the other key customer in Malaysia. 

 

For the very small percentage of products it ships to the US on behalf of customers, freight charge and tariff are borne by the latter.

 

Although UMS Integration has dodged the tariff bullet, it has not been spared the impact of inflation and the shortage of skilled manpower &ndash just as other companies. 

 

As part of its efforts to counter these, it will increase the adoption of automation and robotics so that its operations would not need to be manned by workers. UMS Integration also envisages leveraging technology to control production remotely by smartphone. This would allow it to halt ongoing production and work on another batch if a customer suddenly asks for it, for instance.

 

To entrench itself further in its customers&rsquo business as well as to help them tackle manpower and cost issues, UMS Integration wants to integrate more into their production processes. That is, it wants to become their extended factory for low-volume manufacturing and complex assembly.

 

It will also focus on more high-quality, high-value products in a bid to further raise entry barriers to fend off rivals emerging from India and Vietnam.

 

Luong expects such efforts and its forward-looking practice to help UMS Integration achieve its targets of S$500 million in revenue in five to eight years&rsquo time and maintaining its double-digit net profit margin.

 

On succession plans, the 65-year-old said he has identified a possible candidate as deputy CEO to take over some of his responsibilities in the next few years, but that he intends to continue to be involved in UMS Integration as executive chairman till he retires at 75.   

 

In the listing ceremony on Friday, UMS has made several positive comments on its business outlook:

 

If there are any tariffs, our customers will absorb it because these are all customised products for their operations,&rdquo Loh told reporters following UMS listing ceremony.

 

Demand for its services is expected to remain strong with rising investments into equipment, to produce more chips catering to artificial intelligence (AI), said Loh.

 

&ldquo This will drive demand for semiconductor equipment, which, with UMS being a contract manufacturer, we will benefit from that trend,&rdquo he added.

 

UMS Msia currently trades at more than 8% premium vs UMS SG, indicating strong demand from Msia investors. UMS, FRKN and VALUE are the top 3 picks of UOBKH SG tech manufacturers.