US-China Trade War And Its Impact On 6 SG Manufacturing Stocks
Following our initial coverage on “The Risks Of US-China Trade War On SG Stocks”, we continue to examine the impact of a US-China trade war on our local-listed manufacturing stocks.
Investors Takeaway: US-China Trade War And Its Impact On 6 SG Manufacturing Stocks
AEM Holdings
AEM Holdings (AEM) produces test handlers for its major customer who is mainly located in Singapore. While its customers have factories in China and the US, CIMB does not expect any short-term risk for AEM resulting from the trade war. CIMB notes that AEM’s customer is the leading global player and is unlikely to substitute AEM’s product in the short-term given the customer’s market dominance, financial strength and technological lead. AEM faces a low risk as it is the sole supplier to the customer and is supporting the customer’s efforts in cost reduction.
Low Risk (Add, TP $8.19)
UMS Holdings
UMS Holdings’ (UMS) major customer Applied Materials is a leading front-end semiconductor equipment supplier. The US trade tariff will not have an immediate impact on UMS as Applied Materials does not have any manufacturing presence in China. While UMS will potentially suffer from tariff on aluminium, CIMB pointed out that UMS has already locked in the cost of aluminium by building up its inventory level for FY18 and also recently announced the acquisition of a 70 percent stake in an aluminium alloy producer. As such, short-term risks relating to the aluminium tariffs will be limited.
Low Risk (Add, TP $1.31)
Venture Corporation
Venture Corporation (Venture) only has eight percent of its FY17 revenue tied to consumer products, which is the focus of trade tariffs exchanged between US and China. In terms of manufacturing location, most of its manufacturing capacity is located in Singapore and Malaysia. Venture also has a diversified customer base, with top 50 customers accounting for 90 percent of its revenue. Interestingly, CIMB believes that Venture Corp could even find business opportunities in this round of US-China trade spat, by taking on more orders if customers choose to have their goods manufactured outside of China.
Low Risk (Add, TP $30.81)
Memtech International
A large proportion of Memtech International’s (Memtech) plastic and rubber parts are shipped to their customers’ final assembly, testing and packaging (FATP) locations in China. Memtech’s customers will then ship those products to the US. This puts Memtech right in the middle of the trade blows between US and China. Though 34 percent of FY17 revenue comes from the consumer sector, Memtech is supported by its reputable customers that include Tesla, Kostal Group, Beats and Netgear.
Moderate Risk (Add, TP $1.76)
Sunningdale Tech
36 percent of Sunningdale Tech’s (Sunningdale) FY17 revenue was derived from the sale of consumer-related end-products. Among its manufacturing locations, eight of them are located in China. This puts Sunningdale Tech in a similar position to Memtech where its exposure to the trade war is much higher compared to other manufacturing stocks.
Moderate Risk (Add, TP $2.82)
Valuetronics Holdings
Valuetronics Holdings’ (Valuetronics) presence in China and exposure to the automotive and consumer electronics sectors will pose some risk to Valuetronics, according to CIMB. The company’s top customers in FY17 includes three US companies: Philips (35-40 percent), Delphi (10- 15 percent) and Dymo (20 percent). While Valuetronics’ management estimates the impact to its business to be less than two percent of revenue, CIMB believes that investors should be concerned if a full-blown trade war between US and China comes into play.
Moderate Risk (Add, TP $1.10)
