UMS Holdings Ltd - DBS Research 2019-05-14: Mandatory Offer For JEP Holdings At S$0.15 Per Share

UMS HOLDINGS LIMITED (SGX:558) | SGinvestors.io UMS HOLDINGS LIMITED (SGX:558)

UMS Holdings Ltd - Mandatory Offer For JEP Holdings At S$0.15 Per Share

  • Mandatory offer for associate JEP HOLDINGS LTD. (SGX:1J4) triggered after acquiring 10.9% stake from ELLIPSIZ LTD (SGX:BIX); total stake now stands at 38.8%
  • Acquisition will help UMS HOLDINGS LIMITED (SGX:558) to diversify from cyclical semiconductor industry
  • JEP provides precision machining and engineering services for the aerospace industry
  • Maintain FULLY VALUED call on UMS as near term outlook for semiconductor remains weak



What’s New


Acquiring JEP for S$0.15 per share.

  • UMS HOLDINGS LIMITED (SGX:558) will be making a mandatory conditional cash offer to acquire all the remaining shares of its associated company - SGX Catalist-listed JEP HOLDINGS LTD. (SGX:1J4), other than those already owned. The offer price of S$0.150 per Sale Share represents a discount of approximately 3.8% over the last market transacted price of S$0.156 per Share as at 10 May 2019. UMS will also make an offer to acquire all outstanding warrants issued by JEP, at the offer price of S$0.074 per warrant.
  • This offer was triggered after UMS acquired 43.8m JEP shares or 10.9% stake from SGX-listed Ellipsiz via a married deal. With the acquisition, UMS’ shareholding in JEP increased from 27.9% to 38.8%. UMS will pay Ellipsiz a total of approximately S$6.58m in cash or S$0.150 per Sale Share. This works out to almost 30x FY18 PE.
  • See UMS announcements, JEP announcements, Ellipsiz announcements

Diversifying from cyclical semiconductor industry.

  • The proposed acquisition of JEP is in line with UMS’ overall diversification strategy to tap on new growth sectors beyond the semiconductor industry. UMS acquired c.28% stake in JEP back in January 2018 for S$28.2m or c.S$0.28 per share (after adjustment for 4:1 share consolidation).
  • UMS has made several acquisitions in the past few years, to diversify from the cyclical semiconductor business. In 2018, UMS acquired a 70% stake in Starke Singapore, a non-ferrous metal alloys specialist. In 2017, UMS acquired a 51% stake in water and chemical engineering solutions company, Kalf Engineering, and in 2016, the group also diversified into aerospace components via a 10% stake in All Star Fortress Sdn Bhd.

JEP provides precision machining and engineering services for the aerospace industry.

  • JEP is a leading solutions provider of precision machining and engineering services, with a primary focus on the aerospace industry. It has over 30 years of operating history. In FY18, JEP reported net earnings of S$2.2m, which more than doubled from FY17, on revenue of S$85.9m. JEP's key aerospace clients include major aircraft manufacturing giants in the US, the world's largest aerospace market. UMS currently has no intention to delist JEP.

Maintain FULLY VALUED call on UMS.

  • We have a FULLY VALUED call on UMS with Target Price of S$0.55 pegged to 8x (vs larger peers’ 9x) FY19F PE.
  • Near term outlook for the semiconductor industry remains weak. Key customer Applied Materials (AMAT) is also guiding for a weaker outlook.





Lee Keng LING DBS Group Research | https://www.dbsvickers.com/ 2019-05-14
SGX Stock Analyst Report FULLY VALUED MAINTAIN FULLY VALUED 0.550 SAME 0.550



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