UMS - DBS Research 2022-10-14: Healthy Orderbook But Macro Headwinds Too Strong

• Downgrade UMS (SGX:558) to HOLD with a lower target price on strong headwinds – With the strong macro headwinds including rising interest rates, weakening demand for consumer electronics, and geopolitical risks coming in fast and furious, UMS is not spared, despite its healthy orderbook.
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Global semiconductor shipments entering negative growth territory.

• Worldwide semiconductor shipments have eased from the peak of ~30% y-o-y growth in December 2021 to flattish growth in August 2022, according to data compiled by the Semiconductor Industry Association (SIA). With the ongoing macro headwinds, we expect worldwide semiconductor shipments to dip further in the next few months.

Downtrend should be shorter than the upcycle.

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• Lower shipment leading to negative revenue growth in 2023. Lower shipments would also lead to lower revenue. According to forecasts by Gartner, overall semiconductor revenue will grow 4.0% in 2022 followed by a 3.6% decline in 2023 (vs. previous forecasts of 7.4% and -2.5%).
• Forecasts have been revised down to account for a deterioration in the macroeconomic environment and weakening consumer demand.

UMS not spared from sector sell down, despite strong orderbook.

• Read more at SGinvestors.io.

Lee Keng LING DBS Group Research | https://www.dbs.com/insightsdirect/ 2022-10-14 SGinvestors.io

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