UMS Holdings

(01-05-2016, 10:17 AM)BlueKelah Wrote: Looks like the dbs Vickers review effect has worn off, either that or UMS is now just tracking the index down.

DCF thanks for attending the agm and letting us know.

Did anyone ask about next year's renewal of contract with AMAT? hmm when is it due anyway exactly?

Sent from my MotoG3 using Tapatalk

The renewal with AMAT's Endura system is due Dec 2017. Management shared that AMAT has a dual vendor policy and there is another supplier together with UMS. UMS supply more than 80% because of quality and price. Management is hence very confident with the renewal and their current focus is on maintaining high share after the renewal. 

The bigger picture to focus on is beyond this Endure system's revenue. 60% of UMS business come from component business, the high margin area. This is the area that AMAT buy from UMS to service their existing customers as wear and tear step in and components have to be replaced in less than a year. So with Endura winning market share and UMS being a big supplier over the years, this component market is increasing very fast. This is where the profit will shot up!
While winning the renewal will ensure the future installed base will increase. The growth for the high margin business is already secure from the past system wins.

(01-05-2016, 11:32 AM)DCF Wrote:

(01-05-2016, 10:17 AM)BlueKelah Wrote: Looks like the dbs Vickers review effect has worn off, either that or UMS is now just tracking the index down.

DCF thanks for attending the agm and letting us know.

Did anyone ask about next year's renewal of contract with AMAT? hmm when is it due anyway exactly?

Sent from my MotoG3 using Tapatalk

The renewal with AMAT's Endura system is due Dec 2017. Management shared that AMAT has a dual vendor policy and there is another supplier together with UMS. UMS supply more than 80% because of quality and price. Management is hence very confident with the renewal and their current focus is on maintaining high share after the renewal. 

The bigger picture to focus on is beyond this Endure system's revenue. 60% of UMS business come from component business, the high margin area. This is the area that AMAT buy from UMS to service their existing customers as wear and tear step in and components have to be replaced in less than a year. So with Endura winning market share and UMS being a big supplier over the years, this component market is increasing very fast. This is where the profit will shot up!
While winning the renewal will ensure the future installed base will increase. The growth for the high margin business is already secure from the past system wins.

thanks DCF good info to know. 

From AMAT earnings call, it seems there is a lot of orders for 3D nand systems which use CVD instead of PVD. AMAT has other models for CVD and CMP techonolgy which are not Endura line. I think Endura has a model for CVD as well so it does sound like the ramp up in taiwan/China for these sound encouraging for UMS business.

Hopefully  after XD when all the interest over the yearly big dividend has died down and poor market sentiment will allow chance for me to do some accumulation 

Global Semiconductor Sales Increase Slightly in March
MONTH-TO-MONTH SALES UP FOR FIRST TIME IN FIVE MONTHS; Q1 SALES DOWN NEARLY 6 PERCENT
Published Monday, May 2, 2016 4:30 pm
by Dan Rosso

WASHINGTON—May 2, 2016—The Semiconductor Industry Association (SIA), representing U.S. leadership in semiconductor manufacturing, design, and research, today announced worldwide sales of semiconductors reached $26.1 billion for the month of March 2016, a slight increase of 0.3 percent compared to the previous month’s total of $26.0 billion. Sales from the first quarter of 2016 were $78.3 billion, down 5.5 percent compared to the previous quarter and 5.8 lower than the first quarter of 2015. All monthly sales numbers are compiled by the World Semiconductor Trade Statistics (WSTS) organization and represent a three-month moving average. 

“Global semiconductor sales increased in March for the first time in five months, but soft demand, market cyclicality, and macroeconomic conditions continue to impede more robust growth,” said John Neuffer, president and CEO, Semiconductor Industry Association. “Q1 sales lagged behind last quarter across nearly all regional markets, with the Americas showing the sharpest decline.”

Regionally, month-to-month sales increased in Japan (4.8 percent), Asia Pacific/All Other (2.3 percent), and Europe (0.1 percent), but fell in China (-1.1 percent) and the Americas (-2.8 percent). Compared to the same month last year, sales in March increased in Japan (1.8 percent) and China (1.3 percent), but decreased in Asia Pacific/All Other (-6.4 percent), Europe (-9.8 percent), and the Americas (-15.8 percent).

“Eighty-three percent of U.S. semiconductor industry sales are into markets outside the U.S., so access to overseas markets is imperative to the long-term strength of our industry,” Neuffer said. “The Trans-Pacific Partnership (TPP) is a landmark trade agreement that would tear down myriad barriers to trade with countries in the Asia-Pacific. The TPP is good for the semiconductor industry, the tech sector, the American economy, and the global economy. Congress should approve it.” 

To find out how to purchase the WSTS Subscription Package, which includes comprehensive monthly semiconductor sales data and detailed WSTS Forecasts, please visit http://www.semiconductors.org/industry_statistics/wsts_subscription_package/.
March 2016 chart and graph 

http://www.semiconductors.org/news/2016/..._in_march/
______________________________________________________________________________________________________________________

[Image: SIA%20-%20Beyond%20Borders%20Report%20-%...01_sml.jpg]

BEYOND BORDERS
THE GLOBAL SEMICONDUCTOR VALUE CHAIN
How an Interconnected Industry Promotes Innovation and Growth 
http://www.semiconductors.org/clientuplo...ay%206.pdf
_____________________________________________________________________________________________________________________

3) “The Group has yet to observe a clear pick up in orders from its key customer and expects the second quarter activities of the current year to be relatively subdued.” – which is a bit of a worry.
4) Hopefully, things would improve in 2H2016, will see………..
________________________________________________________________________________________

The share price jump today in anticipation of better results. looks like they were wrong...

[UMS’ gross material margin grew by 3% from 57% in 1Q2015 to 60% in 1Q2016 arising from the higher average USD
exchange rate.
During the current quarter, employee benefits decreased by 22% to S$2.6 million from S$3.3 million in 1Q2015 due to
lower bonus provisions. Depreciation expense decreased by 29% to S$1.4 million from S$2.0 million in 1Q2015 due to
more fixed assets being fully depreciated. Other expenses were relatively flat at S$2.6 million. Other charges/ (credits)
included an S$1.9 million foreign exchange loss (1Q2015: S$0.8 million gain), which was largely attributable to the
depreciation of US dollar in March 2016.
The provision made for income tax was reduced by 63% to S$0.3 million in tandem with the lower profit.
As a result of the above-mentioned, net profit in 1Q2016 declined 55% to S$3.4 million as compared to S$7.5 million in
1Q2015.]

Without the forex loss/gain, net profit would not be down by as much, 5.3m vs 6.7m (down about 20%).

However with the drop in orders from main customer, it means that the Endura line does not benefit from the big ramp up in CVD units to make 3DNand that AMAT has been getting. So means the rest of semicon sector is softening quite a bit.

(10-05-2016, 10:24 PM)BlueKelah Wrote: The share price jump today in anticipation of better results. looks like they were wrong...

[UMS’ gross material margin grew by 3% from 57% in 1Q2015 to 60% in 1Q2016 arising from the higher average USD
exchange rate.
During the current quarter, employee benefits decreased by 22% to S$2.6 million from S$3.3 million in 1Q2015 due to
lower bonus provisions. Depreciation expense decreased by 29% to S$1.4 million from S$2.0 million in 1Q2015 due to
more fixed assets being fully depreciated. Other expenses were relatively flat at S$2.6 million. Other charges/ (credits)
included an S$1.9 million foreign exchange loss (1Q2015: S$0.8 million gain), which was largely attributable to the
depreciation of US dollar in March 2016.
The provision made for income tax was reduced by 63% to S$0.3 million in tandem with the lower profit.
As a result of the above-mentioned, net profit in 1Q2016 declined 55% to S$3.4 million as compared to S$7.5 million in
1Q2015.]

Without the forex loss/gain, net profit would not be down by as much, 5.3m vs 6.7m (down about 20%).

However with the drop in orders from main customer, it means that the Endura line does not benefit from the big ramp up in CVD units to make 3DNand that AMAT has been getting. So means the rest of semicon sector is softening quite a bit.

The result shows the danger of relying heavily on one major client for orders

If the semi-con sector continues to soften, I doubt the dividend payout can be sustained...

DK : there is always an argument to be made about relying on a single major client.

However this result alone does not show the danger of relying heavily on one major client for orders. Even if UMS had multiple customers ordering parts from them, like Tokyo Electron, Lam Research, etc..., business would still have been similarly affected by any softening in the semicon sector since this is the sector where UMS operates in. "Receding tide grounds all boats"

Unless suddenly AMAT goes bankrupt or loses its market share or cancels its contract with UMS, all very unlikely scenarios, then it will show the danger or replying on a single customer.

-N V-

as long as UMS generates free cashflow, strengthens its cash and cash equivalents, NAV, maintain zero bank borrowings and embark on diversification........:all these are positives that I read from the FS, it is worthwhile to stay vested. 1ct dividend coming again end July

Semi-con sector market is volatile, thus I don't overly concern on the quarterly report sales figure, but more on the operational efficiency of the company. Other semi-con suppliers are having lower performance over the same period e.g. Micro-Mech, and Global Testing.

The gross margin continue to improve y-o-y. Net margin is affected by fixed cost with a lower sales, and also the forex losses. The company operation remains sound and competitive.

Of course, the quarter dividend of 1 cents is nice.

(vested)