We maintain SELL on UMS (SGX:558) with a muted outlook. UMS’s 2Q24 PATMI of S$9.3m was below our and consensus estimates (weaker both q-o-q and y-o-y).
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UMS is also facing hurdles obtaining qualification from its new customer, causing ramp-up of orders to be slower than expected. It is also suffering labour shortages and other issues. However, this is normal for any new product/customer, and we don’t expect these issues to be resolved until 2025.
2Q24 weaker q-o-q and y-o-y
UMS's 2Q24 revenue declined 25% y-o-y to S$56m, while PATMI fell 20% y-o-y to S$9.3m which was also weaker q-o-q. This was due to lower revenue from integrated systems, which fell 39% y-o-y as demand from its key customer dropped.
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Hurdles in obtaining qualification from new customer
The US$30m revenue contribution from its new customer in FY24 remaings a challenging feat due to qualifying issues with its new customer which is normal for a new product/new customer. They are also facing a lack of qualified labour issue and are still in the midst of hiring the right talent and labour.
As UMS has started production for its new customer, management expects an uptick in order flow in the coming months however we only expect a potential ramp up in these orders to be delayed into 2025.
Outlook remains muted.
Read more at SGinvestors.io.
Above is an excerpt from a report by Maybank Research. Clients of Maybank Securities may be the first to access the full PDF report @ https://www.maybanktrade.com.sg/.
