UMS Holdings Ltd - CGS-CIMB Research 2018-08-14: Expects Softer Revenue In 2H

UMS Holdings Ltd - CGS-CIMB Research 2018-08-14: Expects Softer Revenue In 2h UMS HOLDINGS LIMITED SGX:558

UMS Holdings Ltd - Expects Softer Revenue In 2H

  • UMS's 2Q18 net profit formed 30% of our full-year forecast. 1H18 was 53% of our FY18F, in line with the historical average of 52% for FY10-17.
  • 2Q18 revenue fell 18% y-o-y due to the decline in orders from its major customer.
  • UMS declared 2Q DPS of 1 Sct. Net cash position of S$11.6m as at end-2Q18.
  • Management guides for softer revenue in 2H18 but still expects to remain profitable for the full year.
  • Target Price maintained at S$1.21, based on an unchanged P/BV multiple of 2.82x.



We deem 2Q18 in line

  • UMS's 2Q18 net profit of S$14.5m formed 30% of our full-year forecast. 1H18 net profit of S$25.9m formed 53% of our full-year forecast, in line with the historical average of 52% (FY10-17).
  • Gross material margin hit a record 64% in 2Q18 (2Q17: 51%; 1Q18: 57%) due to a higher proportion of semiconductor component sales which command better margins.
  • 1 Sct DPS was declared and the balance sheet remained in a net cash position of S$11.6m as at end-2Q18.



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Management remains positive on the long-term outlook…

  • In the mid- to long-term, UMS believes that the prospects for the industry remain bright. SEMI, the global industry association representing the electronics manufacturing supply chain, has projected a 10.8% increase in sales of new semiconductor manufacturing equipment globally to US$62.7bn in 2018, exceeding the historic high of US$56.6bn in 2017.
  • SEMI expects another record-breaking year for the semiconductor equipment market in 2019, with 7.7% growth to US$67.6bn.


…but sees softer revenue in 2H18

  • UMS noted that global billings for semiconductor equipment remain robust although the growth rate has softened. Leading chipmakers in Asia have also cut their sales forecasts to single-digit growth rates for the second half of 2018 due to concerns over rising trade tensions between the US and China as well as slower demand.
  • Although UMS guided for softer revenue in 2H18, the group expects to remain profitable for the full year.


Maintain ADD due to its attractive dividend yield

  • We cut FY18F revenue by 9% to factor in the softer revenue guidance (recall that we had preemptively cut our revenue forecasts in our 1Q18 results note).
  • Our FY18-20F earnings remain unchanged, reflecting the better gross material margins. At an unchanged 2.82x P/BV multiple (ROE: 20.2%, COE: 7.8%), we maintain our ADD call and Target Price of S$1.21.
  • Downside risk is order pullback by its customer.
  • Potential catalysts are stronger-than- expected orders from customers.
  • Dividend yields are attractive at 7.6% over FY18-20F.





William TNG CFA CGS-CIMB Research | https://research.itradecimb.com/ 2018-08-14
SGX Stock Analyst Report ADD Maintain ADD 1.210 Same 1.210



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