UMS Holdings - UOB Kay Hian 2021-11-17: 3Q21 Excellent Space Management Helped Negate Production Constraints

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UMS HOLDINGS LIMITED (SGX:558)

UMS Holdings - 3Q21 Excellent Space Management Helped Negate Production Constraints

• UMS’s 3Q21 results came in slightly ahead of expectations with earnings of S$15.1m (+17.0% y-o-y, +3.6% q-o-q). Revenue remained robust at S$67.6m (+49.7% y-o-y, +1.2% q-o-q), on the back of sustained strong growth in the global semiconductor industry, despite production constraints faced in Penang.
• Outlook remains bright with the acceleration in global chip demand, which UMS expects to take advantage of with its new production site in 3Q22. Maintain BUY.

UMS's 9M21 seen as a slight beat.

• UMS (SGX:558)’s 3Q21 net profit of S$15.1m (+17.0% y-o-y, +3.6% q-o-q) brought 9M21 net profit to S$47.4m, accounting for 77% of our full-year estimate and surpassing 2020 full-year earnings of S$36.5m. 3Q21 revenue grew 49.7% y-o-y to S$67.6m (+1.2% q-o-q), on the back of sustained strong growth in the global semiconductor industry and from the consolidation of JEP (SGX:1J4). Segmentally, component sales leapt by 99% y-o-y to S$37.8m but integrated systems sales eased 6% y-o-y to S$22m due to tighter COVID-19 guidelines in Penang, Malaysia, which restricted production headcount to 60% in Aug and Sep 21. Since October, UMS’s Penang facilities have resumed full production headcount.
• Gross profitability stable, interim dividend raised. 3Q21 gross material margin was stable y-o-y at 54.4% (3Q20: 55.3%, 2Q21: 51.8%), primarily due to the consolidation of JEP, which became a subsidiary (71.4% stake from 40.7% previously) as at 30 Apr 21. Additionally, UMS raised its interim dividend to S$0.01 (3Q20: S$0.005), supported by strong 3Q21 net operating cashflow of S$16.1m (3Q20: S$12.3m).

JEP acquisition timely.

• During August well as implementation of strict safety protocols to safeguard against COVID-19 infections.

Outlook remains bright

• Outlook remains bright, with the acceleration of global chip above its historical five-year average. We believe the high valuation peg is supported by the structural upturn for the semiconductor industry.
• See
  • UMS's Share Price,
  • UMS's Target Price,
  • UMS's Analyst Reports,
  • UMS's Dividend History,
  • UMS's Announcements,
  • UMS's Latest News.
• Catalysts:
  • Higher-than-expected factory utilisation rates.
  • Return of orders for aircraft components to benefit JEP.
  • Better-than-expected cost management.

Clement Ho UOB Kay Hian Research | https://research.uobkayhian.com/ 2021-11-17

SGX Stock Analyst Report BUY MAINTAIN BUY 1.66 SAME 1.66