Thursday, January 23, 2014

UMS Holdings - Cream of the dividend crop (MKE)

UMS Holdings -
Share Price: SGD0.59
Target Price: na
Cream of the dividend crop

We like UMS for its high dividend per share (2013 YTD: 3 cents, 2010-12: 5 cents, with a special dividend of 1 cent in 2010-11). If there is a special dividend in FY13 as well, yield will exceed 10% at the current share price.

Net margins already exceed 20% even with low utilisation rate of 60-70%. Higher utilisation on more volume from Applied Materials and new business could boost margins, enhancing cash flow further and its ability to pay dividends.

High single-customer exposure to Applied Materials (80% of sales) is a concern. But UMS is hooked into the right trend, where industry capex is driven by smart mobile devices.

What’s New
We recently visited precision machining company UMS Holdings in Singapore. UMS makes components, sub-systems and full systems for semiconductor equipment, accounting for 95% of revenue. The rest comes from contract manufacturing of components for the oil & gas industry, which includes customers such as Schlumberger and Halliburton. Its biggest customer is Applied Materials (AMAT), which makes systems that perform most of the steps in semiconductor chip fabrication. AMAT is set to consolidate its position as the world’s largest semiconductor equipment maker with the acquisition of the third-largest player, Tokyo Electron.

What’s Our View
UMS’s share price has seen a gradual re-rating in the past few years after it commenced its OEM business with AMAT in 2012 and following the payment of a quarterly dividend since 2010, which has helped allay investor concerns about its heavy reliance on a single customer. 2014 looks set to be a better year and it may reinstate its special dividend as early as 2013. Buying UMS now for the final dividend of 2 cents would give a yield of over 8% (assuming a holding period of five months), with a special dividend of 1 cent potentially beefing up the return to over 12%!

Source/Extract/Excerpts/来源/转贴/摘录: MKE-Research,
Publish date: 20/01/14

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.

Warren E. Buffett(沃伦•巴菲特)
Be fearful when others are greedy, and be greedy when others are fearful
别人贪婪时我恐惧, 别人恐惧时我贪婪
投资只需学好两门课: 一,是如何给企业估值,二,是如何看待股市波动
吉姆·罗杰斯(Jim Rogers)

乔治·索罗斯(George Soros)



高估期间, 卖对, 不卖也对, 买是错的。
低估期间, 买对, 不买也是对, 卖是错的。

Tan Teng Boo

There’s no such thing as defensive stocks.Every stock can be defensive depending on what price you pay for it and what value you get,
  • Selected Indexes 52 week range

  • Margin of Safety

    Investment Clock

    World's First Interactive Investment Clock