UMS Holdings - Maybank Kim Eng 2020-11-13: Focus On The Upswing

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

UMS Holdings - Focus On The Upswing


3Q20 ahead; target price +4%; BUY

  • UMS Holdings (SGX:558)’s 3Q20 PATMI of S$12.9m (+41% y-o-y, +12% q-o-q) was slightly ahead of our and consensus expectations, on the back of the continued upswing in global semiconductor equipment spending.
  • UMS and key customer Applied Materials (AMAT) are also upbeat about business prospects. We raise UMS's FY20-22E earnings forecast by 4% to reflect this. Maintain BUY on UMS with higher ROE-g/COE-g target price of S$1.42 (2x FY21E P/B).



UMS's 3Q20 summary

  • UMS's 3Q20 revenue rose 37% y-o-y and 12% q-o-q to S$45.2m, primarily driven by sales to AMAT, on the back of robust global semiconductor equipment spending.
  • Gross margin was stable y-o-y at 55.3% despite higher mix of semiconductor integrated systems sales (which typically command lower margins), due to operating leverage and improved efficiency.


Dividend cut to fund opportunities for future growth

  • 3Q20 interim DPS was halved to S$0.005 q-o-q, as UMS is conserving cash in order to be flexible to take advantage of growth initiatives in the short-term. If such opportunities materialise, we believe UMS may need to expand production capacity, and may need to draw on internal resources and credit lines to fund this.
  • To factor in cash conservation, we reduced our UMS's dividend assumption from S$0.06 to S$0.03-0.04 in FY20-22E.
  • The growth opportunity may be a potential new customer, which would bode well for growth and diversification in the long-run, if it pans out.

The upswing continues






Gene Lih Lai CFA Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2020-11-13
SGX Stock Analyst Report BUY MAINTAIN BUY 1.410 UP 1.36



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