UMS Holdings: Earnings outlook still healthy (CIMB)

UMS Holdings Limited
Earnings outlook still healthy
BUY; TP:S$0.72
Price @23/5/12: S$0.38
52-week range (SGD): 0.33 – 0.515

Over to you Andy
• 1Q12 earnings were hit by an unrealised foreign exchange loss of S$1.3m. Change in product mix with lower contribution from the parts business led to a yoy decline in margins.

• Our meeting with UMS CFO yesterday confirms that the next six months outlook is still positive. There is greater clarity on its three months outlook, leading us to believe that 2Q12 should be better than 1Q12 and any variance would likely stem from unrealised foreign exchange gain/loss (arising from the USD/SGD rate).

• We believe that 4cts DPS for FY12 is still the minimum (1ct has been declared in respect of 1Q12 results). Given low capex requirements, we believe that UMS will once again consider the possibility of a special dividend when its 4Q12/FY12 results are announced. • We keep our BUY call, target price S$0.72 based on 2.0x CY12 NTA/share (average for FY01-FY11).

• So, where is the risk? The key uncertainty is what CEO Andy Luong will do with his stake. UMS share price recently crashed after Andy sold part of his stake. The market remains concern on whether Andy will continue to pare his stake in the company and if he will continue to drive the company’s business (Andy has issued a statement that he envisions still being in the driver’s seat for UMS).

Good weather still in semicon land
• Book-to-Bill ratio still above 1.0x. According to the March 2012 Bookto- Bill report published by SEMI, North America-based manufacturers of semiconductor equipment posted a book-to-bill ratio of 1.13x, the second consecutive month that the ratio is above 1.0x.

• What say the experts? IDC recently raised its prediction for the 2012 global chip market to 6-7% annual growth from the 3.1% increase estimated previously. Worldwide semiconductor revenues increased more than 3.7% on year to US$301bn in 2011, IDC said. "The current semiconductor cycle, which started mid-2011, will bottom out in the second quarter of 2012 and fab utilization rates will pick up and accelerate in the second half of this year. Gartner and IHS iSuppli had also revised upward their forecast for the 2012 chip market. IHS increased its growth forecast for the 2012 semiconductor market to 4.3% from the 3.3% predicted previously, while Gartner expects the market to enjoy 4% growth, up from the previous estimate of 2.2%.

• Forecasters boost capital spending outlook. Total semiconductor capital spending is now projected to hit US$56.5bn in 2012, nearly flat from the previous year and almost US$6bn higher than the January outlook, according to a new forecast from VLSI Research Inc. “We expect the second half of this year to be better and we expect 2013 to be a record year for equipment spending.” said Christian Gregor Dieseldorff, senior analyst of fab information in the SEMI Industry Research and Statistics Group.


Source/Extract/Excerpts/来源/转贴/摘录: CIMB-Research,
Publish date: 24/05/12