UMS - Riding On Explosive Chip Demand
- UMS (SGX:558) continues to ride on the strong global chip demand, on the back of the acceleration of 5G, artificial intelligence (AI), and other technology-driven developments. The recent chip shortage is another shot in the arm for the chip equipment maker. The 9M21 results were record-breaking, with earnings close to the S$50m mark.
- Recent data points reinforce our positive industry view. SEMI expects continued double-digit growth of semiconductor manufacturing equipment sales to carry on till 2022. US semiconductor equipment billings remain strong and marked their 24th consecutive monthly increase in September 2021 (+36% y-o-y). We remain positive on the semiconductor industry but expect slower growth ahead. We are expecting the industry to grow at a slower CAGR of 5% in 2023-2025, vs the 8% CAGR for the 2020-2025 period.
- Maintain BUY rating on UMS with a higher target price of S$1.80, pegged to peak valuation of 17x. Our target price for UMS is raised to S$1.80 (from S$1.74), still pegged to its peak valuation multiple of 17x (recorded in 2018), as we roll forward our earnings base to FY22F. This is in line with the methodology for other pure semiconductor plays in our coverage.
- Where we differ: We are more bullish and expect UMS to benefit from the positive developments in the semiconductor industry. Hence, we pegged our target price to peak valuation of 17x.
Above is the excerpt from report by DBS Group Research.
Clients of DBS may access the full report in PDF @ https://www.dbs.com/insightsdirect/.
Lee Keng LING DBS Group Research | https://www.dbs.com/insightsdirect/ 2021-11-15 2021-11-15
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