UMS poised to ride semiconductor industry upturn, say analysts
SINGAPORE (Nov 13): UMS Holdings has produced a better-than-expected set of results for the 3Q19 ended September, beating analysts estimates by a significant margin.
The precision engineering group reported earnings of $9.2 million, some 21% higher compared to earnings of $7.6 million in the same quarter last year.
This was largely due to a 12% increase in revenue to $32.9 million in 3Q19 from $29.3 million in 3Q18, led by a 14% increase in contributions from the semiconductor segment, driven by a surge in demand for semiconductor integrated systems.
UMS had also benefitted from larger share of profits from its associate JEP Holdings, as well as lower expenses and personal costs.
Looking ahead, market watchers now expect UMS to ride the upcoming recovery in the semiconductor industry.
CGS-CIMB Research analyst William Tng opines that with an industry upswing underway, UMS is expected to deliver a stronger q-o-q performance in 4Q19. Hence, the research house has raised the group’s FY19 forecasts.
“The oversupply situation in the memory market is easing,” says Tng in a Tuesday report. “We also raise our FY20-21 earnings forecasts,” adds the analyst, who notes that UMS has recently renewed its contract with a key customer, Applied Materials (AMAT).
DBS Group Research agrees the successful contract renewal bodes well for the company.
“The successfully renewed integrated system business contract with its key customer, AMAT, for another three years helps to strengthen earnings visibility,” says analyst Ling Lee Keng in a Wednesday report.
“We have revised up our projected earnings by 6-7%, as we expect the growth momentum to continue,” says Ling who expects growth momentum to be maintained till 4Q19 at least.
“Demand is picking up with chip inventories easing and new technological disruptors driving the growth of new products and capabilities,” the analyst adds.
On the back of an improving industry outlook and promising growth prospects, DBS is maintaining its “buy” call on UMS with a higher target price of $1.00 from the previous 87 cents.
CGS-CIMB, on the other hand, has chosen to exercise a little caution on UMS, citing unexpected pullback in orders by AMAT to be a potential downside risk. As such, the brokerage is maintaining its “hold” call on UMS with a higher target price of 79 cents, up from 67 cents.
As at 1.24pm, shares in UMS are trading 5 cents, or 6.2% higher, at 86 cents or 11.1 times FY20F earnings with a dividend yield of 4.6%, according to DBS.
