UMS - CGS-CIMB Research 2022-09-15: Boost From Lower Tax Rate

UMS - Boost From Lower Tax Rate

  • On 14 Sep 2022, UMS issued a press release stating that its application for the reinstatement of the pioneer tax status for Ultimate Manufacturing Solutions (M) Sdn. Bhd. (Ultimate) has been approved by the Malaysian Investment Development Authority (MIDA). MIDA has also informed UMS of the relaxation of the employment conditions of Malaysian citizens under the Malaysian government’s 80:20 rule, whereby 80% of its employees must be Malaysians.
  • UMS previously guided that it would write back about S$15m in tax provisions previously provided for in its upcoming 3Q22F results (in 2021, UMS released its 3Q21 results on 12 Nov 2021).
  • We estimate that the tax writeback will increase UMS’s FY22F EPS forecast by 20.8%. We assume that UMS’s application for pioneer tax status for Ultimate will be approved and UMS will be able to meet the 80:20 employment rule requirement. Hence, we now model the tax rate at 13.0% for FY23-24F (previously: 18.6%) leading to ~6.9% increase in FY23-24F EPS forecasts.
  • On 13 Sep 2022, UMS announced the sales of 2,292,700 treasury shares for S$3,060,456.45 or S$1.33 apiece. Post this sale, UMS still has 1,457,300 treasury shares. Post this transaction, UMS’s issued capital (excluding treasury shares) increases to 669.1m, from 666.8m previously. As at end-Jun 22, UMS was in a net cash position of S$41.2m. UMS will use the sale proceeds to support its business growth.
  • Our target price for UMS rises to S$2.17 (as FY23F EPS increases), still based on 15.0x (+2 standard deviation above its Jan 2017 to Aug 2022 P/E multiple) on our FY23F EPS. The +2 standard deviation valuation for UMS is backed by FY21-24F 25.9% EPS CAGR.

Above is the excerpt from research report by CGS-CIMB.
Clients of CGS-CIMB may access the full report in PDF @

William TNG CFA CGS-CIMB Research | 2022-09-15
SGX Stock Analyst Report ADD MAINTAIN ADD 2.17 UP 2.030

Read also CGS-CIMB's most recent report:
2022-09-23 UMS - Customer Diversification Catalyst

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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