UMS - DBS Research 2024-05-14: Short-term Hiccups

• UMS (SGX:558) reported 1Q24 revenue of S$54mil – dived 33% y-o-y and down 27% q-o-q.

A negative surprise - 1Q24 revenue affected by high inventory & weak demand.

• The semiconductor segment, which accounts for 85% of UMS's total revenue, plunged 37% y-o-y (-24% q-o-q) to S$45.7mil, mainly caused by the high inventory of one of its key customers. This customer placed a bigger order in 2023 to enjoy the pricing advantage.
• - Read this at SGinvestors.io -
• Geographically, all UMS's key markets reported reduced revenue in 1Q24, due to weaker semiconductor demand as well as the slowdown in the material distribution business.
• - Read this at SGinvestors.io -

Improvement in gross margins due to change in product mix but net margin still lower.

• Despite the lower revenue, UMS's gross profit margin improved to 53.2% in 1Q24 from 50.2% in 1Q23 and 50.1% in FY23, due to a change in the product mix. The generally higher margin semiconductor components business accounted for 53% of total semiconductor revenue, with the balance 47% from integrated system sales. Over the past few quarters since 4Q22, the components business accounted for less than 50% of total semiconductor sales.
• 1Q24 net margin, however, was reduced to 18.2%, from 21.3% in 4Q23 and 21.5% in 1Q23, as costs remained high. As a result, net profit for UMS tumbled 44% y-o-y and 37% q-o-q to S$9.8mil.
• Overall, UMS's 1Q24 revenue and net profit accounted for only 14% and 11% of our forecasts respectively, below expectations.

Contribution from key customer remains weak; recovery expected only from 4Q24.

• Read more at SGinvestors.io.

Lee Keng LING DBS Group Research | https://www.dbs.com/insightsdirect/ 2024-05-14 SGinvestors.io

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