UMS HOLDINGS LIMITED (SGX:558)
UMS Holdings - Demand Outlook Still Robust
UMS's 2Q21 earnings ahead of street estimates; momentum still robust
- UMS (SGX:558)'s 2Q21 core PATMI of S$16.9m (+46.5% y-o-y and +10.3% q-o-q) met the upper end of our estimate and was ahead of street’s at 51%/53% of respective FY21E.This was driven by semicon strength from Applied Materials.
- We raise UMS's FY21-23E earnings per share forecast by 4-8% as we consolidate JEP (SGX:1J4)’s financials. Our target price for UMS is higher at S$2.10, as we roll forward to 15x FY22E P/E.
- We see easing/ tightening of worker restrictions in Malaysia as a key swing factor for UMS's earnings, given robust demand and adequate components availability.
- Maintain BUY.
Semicon grew q-o-q despite restrictions in Malaysia
- UMS's 2Q21 revenue grew 66% y-o-y to S$66.8m, largely driven by semicon (+57% y-o-y, 25% q-o-q), and the consolidation of JEP (~S$11.2m contribution in 2Q21). The q-o-q growth in semicon was despite worker cap restrictions of 60% in Penang.
- Gross margin rose 1ppt y-o-y to 51.8% due to a higher mix of components, but was down 1.3ppt q-o-q as the consolidation of JEP is margin-dilutive.
JEP capacity aids amid strong order flow
- UMS is seeing strong order flow as the customer experiences in Penang are progressing well, although vaccination rates were not disclosed.
Positive long-term on JEP’s aerospace prospects
- Based on current feedback, any cap on UMS remains positive of JEP’s long-term prospects in aerospace with the gradual re-opening of borders.
- See
- We see a material tightening of worker restrictions in Penang as the key risk to our estimates.
- To boost trading liquidity, UMS has proposed a 1-for-4 bonus issue.
Gene Lih Lai CFA
Maybank Kim Eng Research
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https://www.maybank-ke.com.sg/
2021-08-16
SGX Stock
Analyst Report
2.10
UP
1.800
