UMS HOLDINGS LIMITED (SGX:558)
UMS - Resilient Profitability
Strong 1Q22 on better-than-expected margins
- UMS (SGX:558)'s 1Q22 PATMI of S$19.4m (+26% y-o-y) was ahead of our and consensus estimates, accounting for 31%/27% of respective FY22E. To our positive surprise, margin erosion was more benign than expected despite the inflationary environment. As such, we raise our FY22E PATMI forecast for UMS by 13%.
- Growth was primarily driven by strong demand and the robust outlook for semiconductor equipment. Our target price for UMS rises by 6% to S$1.50 (14x FY22E P/E, from 15x previously). BUY.
Broad-based strength drives 1Q22 revenue growth
- 1Q22 sales rose 71% y-o-y S$84.7m, driven by semiconductor (+57%) and “others” (+193%). “Others” segment was contributed by Starke (materials distribution), Kalf Engineering (water disinfection), and JEP’s tooling distribution business, Industrades.
- Gross material margin was relatively healthy at 51.4% (-1.7ppt y-o-y, -0.7ppt q-o-q) as UMS was able to pass on a certain amount of costs amid a strong semiconductor equipment demand backdrop with tight supply capacity.
Operational updates
- The new plant in Penang remains on-track for completion by the end of this year. Hiring is also progressing as planned despite a tight labour market in Penang.
- For the Malaysian subsidiary that did not enjoy preferential tax rates as it did not meet local worker employment criteria in 4Q21, UMS's management updated that this criteria has now been fulfilled, and discussions to resolve tax issues with Malaysian are ongoing.
Outlook and risks
- Outlook remains robust. SEMI expects global on UMS as we expect structural demand for chips to persist, and that capacity will likely shift towards non-Chinese firms over time.
- See
Gene Lih Lai CFA
Maybank Research
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https://www.maybank-ke.com.sg/
2022-05-11
SGX Stock
Analyst Report
1.50
UP
1.420
