UMS - Maybank Research 2024-08-14: 2Q24 Disappoints; Outlook Still Muted

• 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).
• - Read this at SGinvestors.io -
• 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.
• - Read this at SGinvestors.io -

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.

Jarick Seet Maybank Research | https://www.maybank-ke.com.sg/ 2024-08-14 SGinvestors.io

---