UMS 2Q13 revenue declined 10% yoy or increased 18% qoq to S$32.8m due to signs of recovery in the global semiconductor industry in 4Q12 after going through a trough in 2011 and 2012. Similarly, UMS recovered in business volume in 1Q13 as the foundries resumed their capital expenditure spending, which was previously delayed.
Its 2Q13 gross profit margin remained healthy at 50% as compared to 49% in 2Q12. Some key highlights in the expenses include depreciation expenses which decreased 24% yoy to S$2m as well as allowance for inventory obsolescence which decreased from S$1.1m in 2Q12 to S$0.1m in 2Q13. UMS 2Q13 net profit increased by 3% yoy to S$7.8m.
As of 30 June 2013, with zero debt gearing, UMS net cash remains healthy at S$27.4m as compared to S$15.4m as at 31 December 2012. The board declared a dividend of 1 Singapore cent per share for this quarter (same as last year), bringing the total dividend to 2 Singapore cents per share for 1H13.
Key notes takeaway from results briefing:
-
2Q utilization rate remains at 40-50% level
-
Outlook improving but short term softness remains
-
While the group is looking for potential M&A, the group will continue to pay good dividends
-
The group will continue paying quarterly dividends and expects total 5-6 Singapore cents for this year
-
Maintaining strong relationship with Applied Materials (about 80% of total sales contributed from Applied Materials)
-
Contract with Applied Materials till 2017
-
Integrated Manufacturing Technologies (IMT) which was acquired in 2012 contributing about S$5-6m net profit per year
-
Low capex expansion plan for short to medium term
-
The group expects 4Q13 will be better than 3Q13 and full year performance will be better than 2012
Valuation:
At S$0.52, UMS is trading at 10.4x historical PER, consensus is 9.5x PER in FY13 and 8x for FY14. Given its approximate 10% yield expectations, we believe the stock looks undervalued. However, its current PBR looks fair at 0.9x with 10% historical ROE but excluding S$81m goodwill, P/NTA will be boosted to 1.7x.