UMS Holdings - DBS Research 2020-08-14: Riding On The Coattails Of Semiconductor Upcycle


UMS Holdings - Riding On The Coattails Of Semiconductor Upcycle

  • UMS' 2Q20 results slightly above expectations; higher DPS declared.
  • Supply chain recovering; strong improvement in customer demand.
  • Rosy outlook for semiconductor; SEMI expects equipment sales to increase 6%/17% in 2020/2021.

UMS' 2Q20 Operating Results

  • Strong revenue boosted by semiconductor segment. UMS Holdings (SGX:558)'s 2Q20 revenue climbed 35% y-o-y to S$40.3m. This was attributed to the robust growth of its semiconductor business, which contributed 92% to total revenue. Integrated System sales rose by 65% y-o-y to $19.6m while revenue from component sales were also up by 22%. Others segment dipped 13% mainly due to lower sales from its subsidiary Kalf Engineering.
  • Gross margins dipped slightly to 50.8% in 2Q20 compared to 53.1% in 2Q19, mainly due to changes in the product mix. The higher margins component segment accounts for a lower 47% of the revenue for the semiconductor segment, vs 53% for the integrated system division.
  • 2Q20 net profit surged 43% y-o-y. 2Q20 net profit jumped 43% y-o-y, on the back of the higher revenue, and higher contribution from its associate, JEP Holdings (SGX:1J4).
  • 1H20 net profit of S$22.3m accounts for 52% of our FY20F forecasts, slightly above expectations.
  • UMS declared higher DPS. A 1ct DPS was declared, vs 0.5cts last year.

Healthy cashflow.

  • UMS continued to generate a healthy free cash flow of S$10.4m in 2Q20. Net cash grew 65% to S$41.3m from end December 2019. With its strong financial position, the Group further invested S$1m in JEP Holdings, pared down its borrowings and acquired S$1.9m of UMS shares under its share buy-back scheme.


  • SEMI is expecting sales of semiconductor equipment manufacturing to increase by 6% y-o-y in 2020 and 17.4% in 2021. According to SEMI’s mid-year forecast, global sales of semiconductor equipment manufacturing is projected to increase 6% y-o-y to US$63.2bn in 2020. SEMI added that sales will rise to US$70bn in 2021 locking in double-digit growth of 17.4%. The growth will be driven by memory spending and investment in leading-edge technologies and China.
  • Foundry and logic spending growth will account for about 50% of total wafer fabrication equipment spending in 2020 and 2021. Asia will be the key powerhouse for semiconductor expansion and is forecast to lead the pack in capital spending in 2020.
  • Furthermore, both DRAM and NAND spending in 2020 will surpass 2019 levels and expected to grow by over 20% respectively in 2021. These strong growth figures augur well for UMS, which is a beneficiary of the vibrant chip equipment manufacturing market.
  • Momentum for semiconductor equipment billings remained strong, up 14% y-o-y in June 2020, its ninth consecutive month of y-o-y increase.

UMS - Earnings & Recommendation

Lee Keng LING DBS Group Research | 2020-08-14
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