UMS Holdings - DBS Research 2022-08-16: Growth Momentum Remains Strong

UMS Holdings - Growth Momentum Remains Strong

  • UMS (SGX:558) set another record high, with 2Q22 net profit jumping 19.4% y-o-y (+4.2% q-o-q) to S$20.2m. This was achieved on the back of a 29.7% y-o-y (+2.2% q-o-q) surge in revenue to S$86.6m.
    • Within the semiconductor segment, revenue for the integrated system division rose 11% y-o-y to S$32m while component sales surged 46% to S$43.6m. The jump in component sales is attributed to the growth of UMS’s semiconductor component business, as well as the consolidation of JEP (SGX:1J4)’s semiconductor component business.
    • 1H22 revenue from the non-semiconductor segment, which includes the aerospace division (JEP) and other subsidiaries such as Starke material distribution and Kalf Engineering, surged > 200% and accounts for 13% of total revenue in 1H22, vs 10% in 1H21.
  • For 1H22, UMS's net profit leapt 23% y-o-y to S$39.5m on the back of the 47% surge in revenue to S$171.3m. Net profit and revenue account for 59% and 53% of our full-year forecasts, respectively, above expectations. The strong semiconductor demand worldwide, coupled with favourable tailwinds in the recovering aerospace sector have propelled 1H22 results to reach a new high.
  • The gross profit margin of 51.7% for 2Q22 is comparable to the 51.8% recorded in 2Q21. The net margin of 23.3% in 2Q22 (25.3% in 2Q21) remains healthy despite the surge in the tax rate to 21% from 13% in 2Q21.
  • An interim dividend of S$0.01 was declared by UMS, similar to 1H21.
  • UMS is currently still in discussion with the relevant Malaysian authorities with a view to achieve a favourable outcome on these tax issues. The pioneer tax incentives for one of its Malaysian companies had expired during the year, while the other Malaysian subsidiary was unable to comply with the stipulated local employee criteria (due to the ongoing labour crunch in Penang) to qualify for the pioneer tax incentive.
  • Healthy order forecasts from key customer. UMS's order forecasts remain strong, as its key customer has a bright outlook, expecting sales to increase despite the impact of the ongoing supply chain challenges in FY22. This bodes well for UMS. The growth momentum is expected to be strong in the coming months.
  • The utilisation rate remains high, especially for the integrated system division. Demand remains strong and UMS is still struggling to meet its order backlog. Hence, we can expect a stronger 2H22 vs 1H22.
  • According to SEMI, global semiconductor equipment sales are forecast to rise 14.7% y-o-y in 2022, and about 3% in 2023 to reach $120.8bn. However, near-term challenges such as supply disruptions and rising inflation persist. Some global chipmakers have softened their forecasts and scaled down their capex plans in view of the expected global economic slowdown.
  • UMS will carry on with its expansion plans, with its new Penang factory scheduled for completion by end-2022. This will substantially increase its current production capacity and position the group well to take on new orders from potential customers that are expanding in South-east Asia.
  • We have raised our revenue estimates for UMS by 10% each for FY22F/23F on the back of the strong demand. Net profit forecast for UMS has been increased by 22% each for both years. UMS has delivered a net margin of 23.1% for 1H22, despite the higher tax rate. We have raised our net margin assumption for UMS to 23% for both years, from 20.7%/20.8% for FY22F/FY23F previously. As a result of the higher earnings, our target price for UMS is raised to S$1.83 (previously S$1.70),

Above is the excerpt from report by DBS Group Research.
Clients of DBS may access the full report in PDF @

Lee Keng LING DBS Group Research | 2022-08-16
SGX Stock Analyst Report BUY MAINTAIN BUY 1.83 UP 1.700

Previous report by DBS Research:
2022-03-03 UMS - Strong Results Marred By Tax Provisions

Target prices by 3 other brokers at UMS Target Prices.
Listing of broker reports at UMS Analyst Report.

Relevant links:
UMS Share Price History,
UMS Announcements,
UMS Dividends & Corp Actions,
UMS News Articles


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