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UMS
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Lswoowoo
Senior |
15-Feb-2024 16:04
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Wow. 1.39 so high ady. Huat ar | ||||
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Joelton
Supreme |
14-Feb-2024 10:30
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UMS loads up cash to fund capex for industry upturn
UMS Holdings (UMS), the homegrown integrated original equipment manufacturer (OEM) for front-end semiconductor equipment, is optimistic about its long-term outlook.
This follows a challenging year due to the bottoming out of the semiconductor industry after a downturn.
While UMS&rsquo s fortunes remain closely tied to the cyclical semiconductor industry, the company is also exposed to a different market &mdash the aerospace industry &mdash via its separately listed subsidiary, JEP Holdings. This reduces business volatility given how the two markets are independent of each other.
JEP, which is 78% owned by UMS, provides precision machine services for the aviation, electronics and automobile industries. The company also sells water disinfection systems and trades non-ferrous metal alloys, machines and customised cutting tools under the &ldquo others&rdquo segment. In 3QFY2023 ended Sept 30, 2023, UMS&rsquo s revenue continued to show signs of stabilisation, falling 29% y-o-y but only declining 4% q-o-q despite global demand for semiconductors remaining soft at the time.
In contrast, the company&rsquo s aerospace segment saw a 41% y-o-y increase in revenue, thanks to the recovery in global aviation.
Earnings fell 64% y-o-y to $15.3 million due to softer demand from the semiconductor segment although they grew by 32% q-o-q. UMS benefited from improved material margins, which grew to 51.2% in 3QFY2023 from 50.5% in 3QFY2022, mainly due to higher US dollar/Singapore dollar exchange rates and better margins from the renewal of its integrated system contract with its key customer.
For 3QFY2023, UMS declared an interim dividend of 1.2 cents, same as the preceding 2QFY2023 but 20% higher y-o-y over 3QFY2022&rsquo s one cent.
In his Nov 15, 2023, report, UOB Kay Hian analyst John Cheong notes that the company&rsquo s earnings stood largely in line with its expectations and &ldquo UMS expects its performance in the coming months to be supported by the sanguine guidance of some major semiconductor equipment makers expecting to deliver sustainable outperformance going forward&rdquo .
Furthermore, he notes that UMS has also secured an in-principle agreement with its new customer for a renewable three-year contract. &ldquo This new customer contract win will boost UMS&rsquo s buoyant outlook as its new Penang facilities will be ready for volume production by September. The production ramp-up will enable it to take on new orders from its new customer which is estimated to reach at least US$30 million next year,&rdquo writes Cheong.
Indeed, demand for semiconductors is expected to stage a comeback this year, with Semiconductor Equipment and Materials International (SEMI) pointing to an expected rebound FY2024 through FY2026 rebound, driven by the rise in demand for wafer and silicon-hungry artificial intelligence (AI), high-performance computing (HPC), 5G, automotive and industrial applications.
SEMI also predicts fabrication equipment spending this year to recover by 15% over 2023 to US$97 billion ($130 billion). In a separate report on Feb 5, the Semiconductor Industry Association projects the market to grow 13% this year to nearly US$600 billion.
Meanwhile, the recovery is already seen here in Singapore. According to the Singapore Economic Development Board on Jan 26, total manufacturing output for December was down 2.5% y-o-y but electronics countered the trend with an increase of 6.3%. The semiconductor segment within electronics, meanwhile, shot up by 17.7%, led by improved demand in selected end markets such as smartphones.
CGS-CIMB Research&rsquo s analyst William Tng affirms the bullish view, writing in his Dec 6, 2023, sector note: &ldquo Suppliers supporting the semiconductor industry would continue to benefit from trade diversion into Malaysia, given the ongoing US-China geopolitical tension.&rdquo
Another hopeful indication of UMS&rsquo s year ahead can be seen from the expectations of its key client, leading global semiconductor equipment manufacturer, US-listed Applied Materials (AMAT), whose overall output from Singapore accounts for around 50% of its global semiconductor equipment. For its 1QFY2024 ended Jan 31, AMAT expects net sales of around US$6.47 billion, plus or minus US$400 million, which will be within the range of 1QFY2023&rsquo s US$6.74 billion and higher than 1QFY2022&rsquo s US$6.27 billion.
Placement to fund expansion
In its most recent and clearest sign of the company&rsquo s growth ambitions, UMS raised $51.6 million to help fund new capex to meet growing order volume. The offer of 40 million shares at $1.29 was more than 2.5 times subscribed.
&ldquo The strong response to the group&rsquo s placement underscores our attractive valuation and investors&rsquo confidence in our growth strategy and bright prospects. The placement will position us well to capture the myriad of new opportunities in both the semiconductor and aerospace sectors,&rdquo says chairman and CEO Andy Luong, who left Vietnam back in 1978 as a 17-year-old.
He sees semiconductor growth to be driven by the surge in AI demand and robust EV growth in the region, especially as countries increasingly adopt greener options to reach their carbon reduction targets. In addition, Luong believes he is well-placed to capitalise on the post-Covid aviation boom as air travel is enjoying a sharp rebound worldwide.&rdquo
In its Jan 26 note, DBS Group Research points out that the quantum raised is larger than UMS&rsquo s existing cash balance of just over $30 million. &ldquo This could imply that the group is positive on the semiconductor outlook and looking towards larger capex investments.&rdquo
Specifically, DBS believes the new funding raised is to go towards buying new machinery for the expanded space at Penang. New orders from a new customer in the memory space are seen to grow from less than $50 million a year now to around $300 million over the next two to three years. This will be a sharp reversal for the memory segment, which was hit with an overall 40% revenue drop in 2023 for the global market, to be followed by growth of more than 50% this year, estimates DBS.
Concurrently, UMS&rsquo s key customer in the equipment manufacturing space, believed to be AMAT, is seen to be doing well too. &ldquo Equipment makers generally excel during upcycles, based on the trend seen in the past three up-cycles. Furthermore, technology stocks tend to outperform during Fed rate pause,&rdquo says DBS, which has maintained its &ldquo buy&rdquo call and $1.55 target price for the stock.
According to Bloomberg data, as at Feb 1, there are four active calls on UMS, with all rating the stock a &ldquo buy&rdquo . UOB Kay Hian&rsquo s Cheong is the most bullish with a target price of $1.56 while Maybank Investment&rsquo s Jarick Seet roundsmup the lower end at $1.49, upgraded on Feb 5 from $1.44 previously.
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wehuattogether88
Supreme |
13-Feb-2024 12:18
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Can our tech stocks follow strongly with Japan side?
Japan's Nikkei share average jumped to a fresh 34-year high on Tuesday as trading resumed after a long holiday weekend, with tech-related shares and strong corporate earnings supporting the benchmark stock index. The Nikkei had climbed 2.44 per cent to 37,798.89 by the midday close, hitting its highest level since February 1990. Out of the index's 225 constituents, 185 gained while 39 declined. |
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Alignment
Elite |
02-Feb-2024 20:28
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This is called a top up placing, where the new investors get the shares from the majority investor who then gets the same number of shares from the company. I believe this is done as opposed to a normal placement because the new investors can get their hands on the shares quicker. |
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pkli899
Supreme |
02-Feb-2024 19:59
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Is complicated......he lend out 40m shares for the pte placement exercise. How and why need to I also catch no ball. |
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TingHai88
Member |
02-Feb-2024 18:20
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Never state transact value.. is it share transfer?
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hokpin
Supreme |
02-Feb-2024 18:02
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Andy sold out 6% share as per SGX announcement! What happened? | ||||
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wehuattogether88
Supreme |
02-Feb-2024 12:26
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Nasdaq futures popping UP, should be very good support for tech stocks like UMS & Frencken. | ||||
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Alignment
Elite |
30-Jan-2024 17:27
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An unnecessary dilution inflicted on equity investors. Should have raised the money some other way. | ||||
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Joelton
Supreme |
30-Jan-2024 13:26
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Lswoowoo
Senior |
29-Jan-2024 15:45
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As long buy lower or equal with placement price， it should ok. CIMB will push the price go higher later.
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bishan22
Supreme |
29-Jan-2024 13:27
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Still to high to load...
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l_tan888
Veteran |
29-Jan-2024 13:02
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No wonder its share price is always below Frencken. This company would always like to take unprecedented moves and cause upheavals to its share price. Clearly, I' m losing faith in this company. | ||||
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easywin
Supreme |
26-Jan-2024 16:44
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Probably 1.35 is max
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Lswoowoo
Senior |
26-Jan-2024 16:40
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Should buy more. Wasted.
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easywin
Supreme |
26-Jan-2024 16:17
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Wow so cheap can get 1.31 | ||||
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Lswoowoo
Senior |
26-Jan-2024 15:05
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I want to buy more If the price drop below placement price.
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pkli899
Supreme |
26-Jan-2024 14:53
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I think placement completed then resume......otherwise price drop below placement price exercise will fail.
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Lswoowoo
Senior |
26-Jan-2024 14:50
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Any other announcements? If not why the trading still not yet resumed? | ||||
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pkli899
Supreme |
26-Jan-2024 13:45
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Nothing mention on dividend.......how it' s going to be workout? The new shares, 40m in all, should not enjoy the same amount of dividend existing holders getting. |
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