UMS Holdings

UMS will not be spared from the onslaught. U.S. Semicon stocks are down more than 3% on Fri. Investors are demanding a higher risk free rate premium of 1-2% as seen on the sell down of REITs. Yield stocks like UMS will not be spared.

(22-08-2015, 10:54 AM)Tiggerbee Wrote: UMS will not be spared from the onslaught. U.S. Semicon stocks are down more than 3% on Fri.

On my shoppping list

UMS has been on quite an uptrend since the GFC, but it is also being traded heavily by speculators last year when all the analyst was covering it. Now less speculated on liao but can still make big move up or down.

already holding some indicator lots but hope can crash to 20cent level leh, otherwise really no chance to jump in leh.

-v-

(22-08-2015, 11:00 AM)BlueKelah Wrote:

(22-08-2015, 10:54 AM)Tiggerbee Wrote: UMS will not be spared from the onslaught. U.S. Semicon stocks are down more than 3% on Fri.

On my shoppping list

already holding some indicator lots but hope can crash to 20cent level leh, otherwise really no chance to jump in leh. UMS has been on quite an uptrend since the GFC leh.

-v-

I must admit that the yield looks really good but AMAT contributing to more than 85% revenue and UMS' inability to diversify its customer base beyond AMAT is a huge red flag to value investors.

(22-08-2015, 11:03 AM)Tiggerbee Wrote:

(22-08-2015, 11:00 AM)BlueKelah Wrote:

(22-08-2015, 10:54 AM)Tiggerbee Wrote: UMS will not be spared from the onslaught. U.S. Semicon stocks are down more than 3% on Fri.

On my shoppping list

already holding some indicator lots but hope can crash to 20cent level leh, otherwise really no chance to jump in leh. UMS has been on quite an uptrend since the GFC leh.

-v-

I must admit that the yield looks really good but AMAT contributing to more than 85% revenue and UMS' inability to diversify its customer base beyond AMAT is a huge red flag to value investors.

True lah, but sometimes is hard for local small company to diversify away. Even big shot like F&N for years got a lot of their business and prosperity from partnership with Coca-cola.

think the focus should be on how the semicon industry does in the coming years. Either it end up being cyclical like it always has historically (which means a big correction for AMAT and UMS) or if semicon really evolves into a staple industry like healthcare (look around at all the people nowadays look at phones/pads more than they look at anything else.) things will be good. Either way, even if UMS is diversified more, if semicon market tanks, UMS willl tank and vice versa.

Asset value wise UMS still not yet undervalued with sufficient MOS NAV. Which is why I am not really jumping in more yet. Will definitely start accumulate when it less than 20cent, if it ever gets there. IIRC during 2011 correction UMS almost hit 20cents. I think during GFC it was much below that price as well so possibility to go back down to that level during market correction is quite high..

To be fair, the business model is quite different from GFC era and there was hardly any dividends to support the price then.

As long as they can maintain 1 cent quarterly dividend (a big if), I doubt the price will hit the 20 cents mark.

Tough to get new clients with similar margins. No point sacrificing capacity and margin just for the sake of diversification.

End of the day, like most local companies, if the industries turn, it will suffer as well. But for now, things don't look too bleak for it. Very likely 6 cents dividend will be maintained for FY 2015.

(Not Vested)

(22-08-2015, 11:21 AM)BlueKelah Wrote:

(22-08-2015, 11:03 AM)Tiggerbee Wrote:

(22-08-2015, 11:00 AM)BlueKelah Wrote:

(22-08-2015, 10:54 AM)Tiggerbee Wrote: UMS will not be spared from the onslaught. U.S. Semicon stocks are down more than 3% on Fri.

On my shoppping list

already holding some indicator lots but hope can crash to 20cent level leh, otherwise really no chance to jump in leh. UMS has been on quite an uptrend since the GFC leh.

-v-

I must admit that the yield looks really good but AMAT contributing to more than 85% revenue and UMS' inability to diversify its customer base beyond AMAT is a huge red flag to value investors.

True lah, but sometimes is hard for local small company to diversify away. Even big shot like F&N for years got a lot of their business and prosperity from partnership with Coca-cola.

think the focus should be on how the semicon industry does in the coming years. Either it end up being cyclical like it always has historically (which means a big correction for AMAT and UMS) or if semicon really evolves into a staple industry like healthcare (look around at all the people nowadays look at phones/pads more than they look at anything else.) things will be good. Either way, even if UMS is diversified more, if semicon market tanks, UMS willl tank and vice versa.

Asset value wise UMS still not yet undervalued with sufficient MOS NAV. Which is why I am not really jumping in more yet. Will definitely start accumulate when it less than 20cent, if it ever gets there. IIRC during 2011 correction UMS almost hit 20cents. I think during GFC it was much below that price as well so possibility to go back down to that level during market correction is quite high..

The Value Chains of the Semiconducator industry is quite complex and diversed. The market sturcture, dynamics and factors at play at each value chain are quite different.  Hence, it would be too naïve to assume in general that all semicon companies would more or less be affected equally by the ups and downs of the industry as a whole.
 
From Silicon Extraction => Raw Wafer Production => Semiconductor Design => Mask Production => Front End Production Process (FEPP) => Back End Production Process, the FEPP contains most of the added value in semiconductor production. They are also the most capital-intensive production process.
 
The FEPP Equipment segment of the market is oligapolistic in nature with few industry players and with high barrier to entry – major players are AMAT, TEL, LRCX and KLA. ASML has a near monopoly in the photolithographic segment.
 
If UMS were to diversify to more customer base in the same value chain, who are its potential customers ? TEL, LRCX and KLA who are all AMAT’s competitors.
 
Bear in mind that there had been technology transfer from AMAT to UMS – would AMAT allow its strategic partner - UMS to serve its competitors at the same time - not a chance - UMS's hands are tied IMO..................
 
Would share price of UMS hits below 20 cents? Probably, if AMAT does not renew its manufacturing contract................

One prevailing doubt of UMS, is overly dependent on AMAT. That reminded me the lingering debate on concentrated vs broadly diversified portfolio. I reckon the key is on the quality of the bet(s). If one day, someone offers me a deal, a controlling stake, of a cash company, with price way below cash value. I will be very irrational to invest only a small part of my money with an excuse of diversification.   

To cut it short, the deal of UMS/AMAT is a strategic partnership. UMS got a good margin, and AMAT got good service tailored to its needs. It is a win-win. 

We need to bear in mind that, AMAT is a market leader with market cap close to $20 billion, founded 1967, while UMS is S$0.215 billion, incorporated in 2001. I would like to quote a comment from Mr. Ow in his recent interview on SSC shareholder concern, of its concentrated exposure to Japan NYK.

"I consider [NYK] a good counter-party because of their spread of activities. You say four out of six of our ships [are chartered to them]. I wish I could get 40 more [contracts] from them. It is not easy to get such contracts from a Japanese major like them. There's a long, long, queue"

I reckon, AMAT to UMS, is at similar situation as NYK to SSC.

(vested)

Hi CF,
 
In terms of quality and customer concentration, I concur with you that “what AMAT is to UMS” is “similar” to “what NYK is to SSC” - but there are not exactly the same.
 
I believe, in the AMAT-UMS strategic partnership, there exist an exclusivity agreement under which UMS is barred from making any deals with AMAT’s competitors.
 
Whereas, in the NYK-SSC situation, I don’t think there exist such exclusivity agreement under which SSC is restricted from dealing with any of NYK’s competitors…………….    
 
(vested)

(23-08-2015, 09:41 AM)Boon Wrote: Hi CF,
 
In terms of quality and customer concentration, I concur with you that “what AMAT is to UMS” is “similar” to “what NYK is to SSC” - but there are not exactly the same.
 
I believe, in the AMAT-UMS strategic partnership, there exist an exclusivity agreement under which UMS is barred from making any deals with AMAT’s competitors.
 
Whereas, in the NYK-SSC situation, I don’t think there exist such exclusivity agreement under which SSC is restricted from dealing with any of NYK’s competitors…………….    
 
(vested)

I agree there are many technical differences between the two relationships, in two distinctively different sector, but we should agree that both are good deal to UMS/SSC.

The key point is, UMS/SSC has sufficient moat among peers, in order to win, either a long-term chartering contract, or a strategic partnership with market leader of much larger in size. Both won based on merit. The quality and competitiveness, should sustain, even without AMAT/NYK endorsement, IMO.

(vested)

the yield on this one is getting ridiculously high.

-accumulating-