Tech Manufacturing Sector - CGS-CIMB Research 2019-05-21: NEUTRAL

UMS HOLDINGS LIMITED (SGX:558) | SGinvestors.io UMS HOLDINGS LIMITED (SGX:558) FRENCKEN GROUP LIMITED (SGX:E28) VENTURE CORPORATION LIMITED (SGX:V03) RIVERSTONE HOLDINGS LIMITED (SGX:AP4)

Tech Manufacturing Sector - NEUTRAL


Positive catalysts to look out for


2H19 product launches.

  • Within the Singapore tech manufacturing segment, VENTURE CORPORATION LIMITED (SGX:V03) is the biggest listed stock by market cap, and the only manufacturing stock on the STI. Venture Corp is looking at product launches by its customers in 2H19 to drive y-o-y earnings growth in FY19.

Long-term beneficiary of US-China trade war.

  • The US-China trade war could lead to the development of two supply chains, one to support the US and another for the EU/China bloc. If this happens, SGX-listed tech manufacturing companies with Southeast Asian presence could benefit.


Negative catalysts to fear


Economic slowdown.

  • Tech products are ultimately still consumer discretionary goods. In the short term, the slowing global economy due to the US-China trade war will inevitably crimp demand.

Outright ban on tech trade with China.

  • An outright ban on the sale of US semiconductors and semiconductor equipment will be a real dampener for companies participating in the semiconductor industry supply chain.


Risk of earnings cuts in the next 2 quarters? NO

  • Venture Corp: the real answer is, we are not sure given the potential broader picture, ripples from trade tensions and the limited disclosure by the company. However, we guess that our FY19F earnings estimates are conservative at 4% y-o-y growth.
  • Venture Corp has plants in Malaysia and Singapore which also cushions it from being directly caught in the trade dispute. In addition, we believe its life science and test & measurement products are also more defensive than generic consumer products that are affected by a slowdown in global growth. In terms of q-o-q performance, management has highlighted that product transitions at some of its customers could introduce near-term volatility to its performance.
  • In the semiconductor space, 2H19F visibility for UMS HOLDINGS LIMITED (SGX:558) remains limited at this juncture.


Stock preference: Frencken the most preferred, UMS the least



See also






William TNG CFA CGS-CIMB Research | https://research.itradecimb.com/ 2019-05-21
SGX Stock Analyst Report REDUCE MAINTAIN REDUCE 0.550 SAME 0.550
ADD MAINTAIN ADD 0.900 SAME 0.900
HOLD MAINTAIN HOLD 17.880 SAME 17.880
ADD MAINTAIN ADD 1.220 SAME 1.220



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