UMS Holdings - Maybank Kim Eng 2021-05-11: Play On Chip Shortages

UMS HOLDINGS LIMITED (SGX:558)

UMS Holdings - Play On Chip Shortages

UMS (SGX:558)'s 1Q21 core PATMI of S$15.4m (+43.6% y-o-y, +42.5% q-o-q) beat our and consensus forecasts, at 28%/29% of FY21E respectively. This is driven by strength in global semicon equipment spending. We raise FY21-22E EPS by 11-14.5% to factor in the robust momentum.
Our target price for UMS rises to S$1.80, on an unchanged 15x FY21E P/E.
UMS is our top pick in our SG tech coverage, as we see it as the best proxy to play current chip shortages. BUY.

UMS's 1Q21 revenue rose 42% y-o-y to S$49.6m, on the back of accelerating capex demand from global wafer fabs. Within the semicon segment (+47%), integrated systems soared 75% from a low base, while components sales jumped 28% y-o-y. Barring unforeseen circumstances, we believe future quarters in FY21E should enjoy sequential strength, in line with AMAT’s expectations.
Based on 1Q21 run rate, we believe our revised FY21E remains undemanding, and see upside potential.

Following a 16% in WFE spending in 2020, SEMI expects WFE to grow 15.5% in 2021 and 12% in 2022 to hit US$80b. Furthermore, AMAT is expecting to continue gaining market share in 2021 and beyond. We believe these translate positively to UMS.
Interim dividend was maintained y-o-y at S$0.01, a positive surprise as we were expecting S$0.005.

UMS remains our top pick in the SG tech sector as it has the highest exposure to WFE spending, which in turn is the best way to play current chip shortages, in our view. Moreover, risks of raw material shortages appear low, as needs are planned with Starke (materials distribution arm) way ahead of schedule; and UMS is also securing components via advanced payments.
In our view, the biggest risk is if the COVID-19 situation in Malaysia deteriorates to the point where manufacturing of essential goods is jeopardised.
See

Gene Lih Lai CFA Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2021-05-11

SGX Stock Analyst Report BUY MAINTAIN BUY 1.80 UP 1.570