Global semiconductor industry is in a cyclical up-cycle, driven by Internet of Things (IoT) and mobile devices. Strong growth in electronics and precision engineering clusters likely to provide support to Singapore’s economy in 2017.
The 12 semiconductor SGX-listed stocks, riding on the strong near-term momentum in the industry, generated an average total return of 65.7% in the year-to-date, bringing their one-year average total return to 115.6%.
Singapore’s three largest semiconductor stocks are in net-cash positions, which ensures dividend payouts to their shareholders.
Global Semiconductor Industry in Cyclical Up-Cycle
Strong Near-Term Momentum Driven by Internet of Things (IoT) and Mobile Devices
The global semiconductor industry is currently in a cyclical up-cycle, driven by strong demand for mobile and Internet of Things (IoT) devices. Global semiconductor revenue in March 2017 grew 18.1% YoY, the largest YoY increase since October 2010, according to data from Semiconductor Industry Association (SIA). The world’s largest integrated circuit (IC) foundry, Taiwan Semiconductor Manufacturing Company (TSMC), has also raised its 2017 global semiconductor industry growth forecast to 7% (from 4% previously) at an earnings conference in mid-April. TSMC is widely seen as the barometer for the global semiconductor industry.
Global Semiconductor Revenue Posting Strong YoY Growth in Past Six Months
Source: Semiconductor Industry Association (SIA)
Positive Impact Seen for Singapore Economy in 2017
Singapore is one of Asia’s semiconductor hubs. The industry is an important contributor to the country’s economy, representing 17.0% of Singapore’s total manufacturing output. Singapore’s Ministry of Trade and Industry (MTI) indicated that the country’s economic growth in 2017 is likely to come in above 2% on the back of an improving global outlook. Specifically, MTI stated that the Electronics and Precision Engineering clusters will continue to see strong growth for the rest of 2017.
Singapore’s Electronics cluster has demonstrated strong momentum with its 13th consecutive month of YoY output growth (click here for more details).
Singapore Semiconductor Stocks Generated YTD Total Return of 65.7%
There are 12 semiconductor companies listed on the SGX, with a combined market capitalisation of S$1.2 billion. Riding on the industry’s cyclical uptrend, these 12 stocks generated an average total return of 65.7% in the year-to-date, bringing their one-year average returns to 115.6%.
These 12 stocks currently trade at a market-capitalisation weighted trailing price-to-earnings (P/E) ratio of 26.0, vs. the 9.5x at the beginning of the year. This is an indication that the Sector’s valuation has re-rated.
Three Largest Semiconductor Stocks in Net-Cash Position, Enabling Dividend Payouts
UMS Holdings - Leading manufacturer of high precision front-end semiconductor components for various semiconductor equipment.
- UMS is in a net-cash position of S$47.9m (9.5% of its market cap) as of the last reported quarter and has been paying out consistent dividends to its shareholders.
- According to DBS research, UMS is well-positioned to benefit from increased global semiconductor equipment spending and plans to grow production capacity to capitalise on the strong end-demand.
- DBS also believes that the company’s acquisition of a 51% stake in water and chemical engineering solutions company (Kalf Engineering) and investment in aerospace component business (via 10% stake in All Star Fortress Sdn Bhd) could potentially bear fruit in the longer term.
Micro-Mechanics Holdings - Leading supplier of high precision tools, parts and assemblies for the semiconductor, medical, aerospace and other high technology industries.
- Micro-Mechanics has a diverse customer base of 650 customers with no customer concentration risk and consistent gross margins of 55% and above (for the past two years).
- The steady revenue stream has enabled a highly cash-generating business with positive free cashflow.
- Management also has a firm dividend policy of paying out not less than 40% of earnings to shareholders.
AEM Holdings - A designer and manufacturer of equipment and precision components for the semiconductor, solar, smart card and other industries.
- AEM recently reported a 17-fold YoY increase in its FY1Q17 net profit, coming on the back of a 3.5x YoY improvement in its revenue.
- According to CIMB research, AEM today has successfully restructured its business with a healthy net cash balance sheet. AEM has also returned to profitability, driven by orders for its Test Handlers to its major customer (established relationship for 15+ years).
- CIMB believes the key share price catalyst for AEM’s stock will be further acceleration of order momentum (sales orders at S$152 million for equipment and kits to be delivered in 2017).
The 12 semiconductor stocks are listed below, sorted by market capitalisation. Click on each stock to visit its profile page on SGX StockFacts.
| Name | SGX Code |
Market Cap S$m |
Price Last Close S$ |
P/E (x) |
Total Return YTD % |
Total Return 1 Yr % |
Total Return 3 Yr % |
Dvd Ind Yld % |
|---|---|---|---|---|---|---|---|---|
| UMS Hldgs | 558 | 506 | 1.180 | 16.7 | 99.9 | 128.7 | 118.1 | 4.1 |
| Micro-Mechanics Hldgs | 5DD | 176 | 1.265 | 13.5 | 50.9 | 74.1 | 166.3 | 4.7 |
| AEM Hldgs | AWX | 172 | 2.650 | 20.2 | 364.7 | 707.1 | 441.6 | 0.5 |
| Ellipsiz | BIX | 94 | 0.565 | 11.2 | 65.6 | 78.4 | 119.0 | 3.2 |
| Avi-Tech Electronics | BKY | 77 | 0.450 | 12.5 | 64.5 | 107.3 | 367.6 | 4.3 |
| Sunright | S71 | 58 | 0.470 | 29.6 | 56.7 | 130.7 | 251.7 | 0.4 |
| CDW Hldg | BXE | 57 | 0.250 | 216.9 | 2.8 | -9.7 | 18.3 | 3.9 |
| Global Testing Corp | AYN | 48 | 1.360 | 10.0 | 39.5 | 79.7 | 131.8 | 7.3 |
| Manufacturing Integration Tech. | M11 | 49 | 0.220 | N/A | 26.4 | 12.8 | 287.7 | N/A |
| ASTI Hldgs | 575 | 32 | 0.047 | N/A | 6.8 | 67.9 | 2.2 | N/A |
| Smartflex Hldgs | 5RE | 28 | 0.220 | N/A | 49.0 | 48.2 | 293.4 | 4.5 |
| Advanced Systems Automation | 5TY | 4 | 0.001 | N/A | -38.5 | -38.5 | -81.5 | N/A |
| Average | 41.3 | 65.7 | 115.6 | 176.3 | 3.7 |
Source: SGX, Bloomberg & SGX StockFacts (data as of 24 May 2017)
Singapore – One of the Largest Semiconductor Hubs in Asia
According to the Economic Development Board (EDB), Singapore’s semiconductor industry is one of the largest in the Asia Pacific region, fabricating about one in 10 of the world’s ICs and is home to some of the largest semiconductor companies globally. Singapore is also a leading location for advanced semiconductor manufacturing, with 15 silicon IC wafer fabs, 4 compound semiconductor wafer fabs, and 3 Micro-Electro-Mechanical Systems (“MEMS”) wafer fabs located in the country.
