UMS - SAC Capital 2021-08-19: Demand Still Going Strong

UMS HOLDINGS LIMITED (SGX:558)

UMS - Demand Still Going Strong

UMS (SGX:558)’s 1HFY21 revenue was 47.1% of our FY21E forecast, as consolidation of JEP’s results only began in 2Q, and partially also affected by Malaysia’s MCO which restricted number of workers in the facility. 1H PATMI were, however, 72.9% of our forecasts, with higher-than-expected profitability, along with the
1. waiver of a S$3.8m debt and interest, and
2. forex gain booked of S$0.5m, offset by a S$2.0m loss on JEP acquisition.

UMS's 1HFY21 revenue rose 54.8% y-o-y from S$75.2m to S$116.4m. Semiconductor segment rose 52.8% y-o-y from S$68.9m to S$105.3m, making up 90.5% of revenue, as both integrated system and component sales increased, driven by high capex from global wafer fabs. PATMI rose 1.45x to S$32.3m.

In June, UMS completed the mandatory offer for JEP (SGX:1J4), which ended with a 71.39% ownership by UMS. JEP’s 1H revenue was S$29.5m. Aerospace prospects are still rocky for now, but this may change with the potential reopening of borders. At the moment, JEP is able to take on some of the orders, adding to UMS’s supply capacity.

UMS is proposing a bonus issue on the basis of 1 bonus share for every 4 existing shares to increase their trading liquidity and broaden their shareholder base and investor pool.

Our target price for UMS is based on a FY21E P/E of 18.1x. We maintained our FY21E revenue but adjusted our FY21 PATMI estimates (+51.8%) to account for the strong set of results in 2Q, higher ownership stake in JEP and higher-than-expected profitability of the consolidated contribution.
We also introduced our FY22E estimates, which reflect a 14.3%/10.2% y-o-y increase in revenue/profit respectively on the continued growth of the semiconductor segment and a better outlook on the aerospace segment next year.
Our target price implies a 4.7% upside to the last traded UMS's share price.

Lim Li Jun Tracy SAC Capital Research | Lam Wang Kwan SAC Capital | https://www.saccapital.com.sg/ 2021-08-19

SGX Stock Analyst Report HOLD MAINTAIN HOLD 1.80 UP 1.46