UMS Holdings

[Boon]

It seems like the CEO and siblings have cash out with substantial amount of money. Until the true rationale for doing so could be unravelled, concerns among shareholders would remain.

The other concern is the cyclical nature of the industry which Nick has mentioned. How long would this good run lasts? When is the next downturn and how would UMS cope with it ?

On a positive note, I do view the acquisition of IMT-S and IMT-USA positively. The $28 million price tag worked out to be 4 times Profit Before Tax of IMT Group's 2010 earnings, which seems reasonable. I think it is a synegistic and value accretive acquisition. The acquisition was completed in mid-Feb 2012 and hopefully, earning contributions from this acquistion would be reflected positively in the coming quarters.

(Vested)

[dzwm87]

1) Quest World and CEO divesting its stake (approx 10% of issued shares) at around 45 - 50 cents in 2012.

2) QW and CEO selling IMT Group to UMS for $28 million cash.

3) UMS paying 11 cents / share dividend in FY 2010 and FY 2011 and proposing quarterly dividends in FY 2012 onwards.

Maybe can work out the "circular effect" which the CEO stands to gain:

i. he gain money from his substantial stake of shares sold in April 2012
ii. he ALSO gain money from the sale of IMT group
iii. he ALSO gain money from the dividend payout from the remaining stake of shares which he held

In aggregation, this will sum up more than the amount he received just from his shares sale. That's really in need of A LOT of money.

[KopiKat]

1) Quest World and CEO divesting its stake (approx 10% of issued shares) at around 45 - 50 cents in 2012.

2) QW and CEO selling IMT Group to UMS for $28 million cash.

3) UMS paying 11 cents / share dividend in FY 2010 and FY 2011 and proposing quarterly dividends in FY 2012 onwards.

Maybe can work out the "circular effect" which the CEO stands to gain:

i. he gain money from his substantial stake of shares sold in April 2012
ii. he ALSO gain money from the sale of IMT group
iii. he ALSO gain money from the dividend payout from the remaining stake of shares which he held

In aggregation, this will sum up more than the amount he received just from his shares sale. That's really in need of A LOT of money.

I'm always curious to see how the Rich moves Millions the way we moves our Dollars and even Cents. As usual, to get a better picture, I like to do a Timeline study,

Sale of IMT-S & IMT-USA

17-Feb-12 : IMT-S (S$19.8M) & IMT-USA (S$8.2M) Acquisition Completed
- Andy Luong : IMT-S (S$19.8M) + IMT-USA (70.84% * S$8.2M = S$5.81M) = S$25.61M
- Quest World : IMT-USA (29.16% * S$8.2M) = S$2.39M


Sale of UMS Shares

Andy Luong

26-Apr-12 : 8,074,000 @ $0.476 = $3,843,224
27-Apr-12 : 4,570,000 @ $0.47 = $2,147,900
Total = S$5,991,124

Quest World (Will use Day Close Price as their Sell Price not declared)

9-Mar-12 : 875,000 @ $0.51 = $446,250 (Day Range $0.51-$0.52)
12-Mar-12 : 8,400,000 @ $0.485 = $4,074,000 ($0.48-$0.515)
13-Mar-12 : 10,000,000 @ $0.485 = $4,850,000 ($0.48-$0.49)
Total = $9,370,250

After the 13-Mar sale, their stake fell below 5% and no further announcements were required. Assuming they sold their balance stake (volume remained high for a few days) and using Price = $0.48 (not unreasonable as Andy Luong sold his stake later in April at $0.47-$0.476), then,

12,900,000 @ $0.48 = $6,192,000
Potential Total = $15,562,250


Dividend Collected

22-May-12 : Andy Luong = 97,484,000 @ 8ct = $7,798,960

World Quest (if didn't sell balance 12,900,000) = $1,032,000


GRAND TOTAL

Andy Luong = $39,398,964
World Quest = $12,793,370 (retain 12.9Mil UMS Shares) / $17,953,370 (sold all UMS shares)

Grand Total (Andy Luong + World Quest) = $52M - $57M


Comments

If I were an existing shareholder of UMS and had seen the CEO (Andy Luong) selling down his stake previously in 2008 and is familiar with UMS biz over the years, I guess I'd be confident enough to take this opportunity of share price weakness to collect more UMS shares.

But, as a non-existing shareholder and even with my saliva drooling at the potential >10% yield, I'd still be rather frightened by the selling from the CEO + sis-in-law, expecially after they'd sold IMT to UMS. Especially since market is in FEAR due to Euro crisis, I'd also be busy 'fighting' and 'defending' at several 'battle fronts.' Nevertheless, will keep in my watch list in case I suddenly have a lot of free funds..

Lastly, I'm still very curious what they plan to do with that $50M+ of funds raised. If I'm an optimist, I'd think they're planning to use it to acquire new biz, build it up and perhaps sell to UMS in the future for even more profits. If I were a pessimist, then it looks like they're planning to run away together.. Hee..

PS. My figures may have errors as I'm getting a headache tracing and computing it

Special Thx to 'Nick' & 'Boon' for Hightlighting & Sharing on UMS!

---

Profiles of the CEO & COO. I wonder if there's a romantic story on how they met at Long's. Hope he's not really planning to run away with sis-in-law!

Andy Luong
Chief Executive Officer
Mr. Andy Luong was appointed as Chief Executive Officer of the Company in January 2005. Mr. Luong previously served as Chief Operating Officer of the Company since April 2004.

As President and Founder of the UMS Group, he has more than 20 years of experience in manufacturing front-end semicon components. He acquired his machining skills through his experience in working in his family's machining business in Vietnam. He emigrated to the USA from Vietnam in 1979 and shortly after college, started a precision machining business called Long's Manufacturing, Inc.


Sylvia SY Lee Luong
Executive Director
Mrs. Sylvia Luong was appointed as an Executive Director of the Company on 30 June 2010.

Mrs. Luong was appointed the Group's Chief Operating Officer on 23 November 2007. Prior to her appointment, she was the Vice President of Sales & Marketing of the Group. Mrs. Luong is responsible for the daily operations of the Group and managing the Group's marketing and business development efforts. She has more than 20 years of experience in engineering and marketing and began her career with Avantek, Inc. as an engineering assistant before joining Long's Manufacturing, Inc in 1989.

---

Looking at UMS history does give one some assurance that they're unlikely to be planning to run away, unless there're hidden unknowns...


History

2009 - February, Penang Hub in operation.
2008 - February, Grand opening of new Changi North Rise facility.

2007
- August, Ground Breaking of Penang (Malaysia) facility.
- Announcement on the Change of Name of the Company to UMS Holdings Ltd.
- Entered into an exclusive contract with a major oil & gas company.
- UMS obtained AS9100:2004 certification.

2006
- Ground Breaking of a new 80,000 square foot facility in Changi North Rise, Singapore
- Announcement of a US$20 million investment into new business segments including aerospace and oil and gas.

2005 - Incorporation of subsidiary company in the state of California-ASL International Trading, Inc.
2004 - Norelco Centreline Holdings Limited renamed Norelco UMS Holdings Ltd upon merger with UMS Semiconductor Pte Ltd.
2003 - Upgraded to listing on SGX mainboard.

2001
- IPO of Norelco Centreline on SGX SESDAQ listing.
- Incorporation of Norelco Centreline Holdings Limited.

2000 - Uraco Manufacturing (Pte) Ltd renamed UMS Semiconductor Pte Ltd.
1996 - Incorporation of Uraco Manufacturing (Pte) Ltd in Singapore, joint venture between Andy Luong and URACO Holdings Limited
1984 - Founding of Long’s Manufacturing in Silicon Valley, USA by Andy Luong.

[Nick]

Kopikat - you make the Luongs sound like a bunch of crooked S Chip bosses lol ! They probably have their reasons for building up a war-chest exceeding $50 million within 2 years and it will be virtually impossible to guess the right reason unless we speak to them. I believe this is the first and only IPT M&A deal since listing so let's see if more will come in the future.

CIMB has issued a report today maintaining its bullish outlook for 2012 but also shares the concerns of the investment community about the CEO recent share transactions ie will he continue to pare down his stake ?

http://kfc1973-stock.blogspot.com/2012/0...still.html [Report]

UMS closed at 38.5 cents.

(Vested)

[KopiKat]

Kopikat - you make the Luongs sound like a bunch of crooked S Chip bosses lol ! They probably have their reasons for building up a war-chest exceeding $50 million within 2 years and it will be virtually impossible to guess the right reason unless we speak to them. I believe this is the first and only IPT M&A deal since listing so let's see if more will come in the future.

No lah... You misread me..

I gave the best and worst case scenario of what they may be planning to use the huge amount of cash raised (~$50M). In case you missed it, I reproduce the best case,

If I'm an optimist, I'd think they're planning to use it to acquire new biz, build it up and perhaps sell to UMS in the future for even more profits.

There could be many other scenarios in between eg. buying a bungalow in Sentosa or an island in Greece or even to diversify into other non-semicon biz.

Sorry... matter of past working life habits - thinking in terms of worst (will translate to potential max losses) and best case scenarios (can translate to potential rewards) and then trying to figure out the typical (likely) case to see if the risk-reward is worth it.

PS. I was actually quite tempted to buy some today (if I don't, I'll likely lose interest and stop following it) but chickened out

[Nick]

Haha no issue Kopikat ! Please keep sharing your views here in this thread. It has been an eye opener to see the millions on the move.

An interesting article on their major customer and partner - http://www.forbes.com/sites/greatspecula...-spending/

[KopiKat]

An interesting article on their major customer and partner - http://www.forbes.com/sites/greatspecula...-spending/

From that article, if you click on Applied Materials (the major customer and partner), you'll get a price chart + some financial ratios.

Just looking at the share price alone, the more I increase the Time range ie. 1m -> 3m -> 6m -> 1y -> 2y -> 5y, the less comforting I feel as the Peaks (Share Price) was higher.

So, either it's getting more and more undervalued (ie. less and less popular with investors) or their biz must have become less and less attractive with investors. Not very comforting... Must dig into their financials to understand more (to confirm) since it's their major customer.

If you click on Lam Research (another of their customer?) and do the same thing, just looking at their Share Price Charts alone don't give as bad a feeling (but we get to see how it may possibly relate to the cyclical nature of the semicon biz)..

[Boon]

KopiKat, thanks for your time and effort in working out "the millions on the move" as Nick called it. Am appreciative and respectful of your "best and worst case scenario" views.- very interesting.

By the way, here are some queries which I hope someone would able to addressed or explore:

1) 1Q 2012 result : "Gross Material Margin" stays around 52%, does anyone know exactly what "Gross Material Margin" is ? UMS seems to be able to maintain this margin despite relying heavily on Applied Material for its business. Unlike Apple-Foxconn relationship where Foxconn's margin is very thin.

2) Who are UMS's major competitors ?

3) On Dividend Policy: (This is a more general discussion): UMS declared and paid 1Q, 2Q, and 3Q 2011 dividend without any resolution, while its 4Q2011 (or FY2011) final dividend had to be voted and passed by shareholders at the AGM before being payout. I think this happen to most companies. Why is the final dividend payout always need to be voted by shareholders at the AGM, but not the interim dividends? I am still puzzling over why a dividend policy was issued lately by UMS ?
There was no voting at all for dividend payout for other companies like GIL(Global Investment Limited).

(Vested)

[Nick]

Good questions Boon.

1) Historically, the gross margins has been around 50 - 60% (since 2007 till date) and around 45% in 2005 - 2006. I believe the computation is (Revenue - Raw Material Purchases - Change in Inventories) / Revenue x 100%. Based on 1Q 2012 figures, the Gross Margins = (31,992 - 14,328 - 1,131) / 31,992 x 100% = 51.7% or approx 52% as stated in the press release.

I am also mystified by the high gross margins enjoyed by UMS despite having a single major client. My guess is that UMS isn't a mere manufacturer or mass component supplier to Applied Materials - it adds value to the supply chain via system integration and equipment testing. The fact that Applied Materials chose to subscribe for 24.1 million new UMS shares at 36.6 cents in 2007 shows that there is some value in this partnership. But what exactly is this value - I am not too certain. Perhaps, forummers with industrial knowledge can share their knowledge with us ? I have been guilty in the past of using the numbers presented to justify business (barriers, prospects etc) instead of using my knowledge of the business to justify the numbers presented. This is a classic example.

2) The recent IMT EGM circular contains an IFA report with comparisons with regional peers against both UMS and IMT.

http://info.sgx.com/listprosp.nsf/5ec09b...40037fb31/$FILE/UMS-Cir%28Casting%29.pdf [Circular]

3) If I am not mistaken, based on the Company Act, Companies need shareholder's approval to declare final (but not interim) dividends. This does not apply to mutual funds or reits or business trust. Since the likes of GIL and MIIF are Bermuda incorporated mutual funds, they don't need shareholder's approval to declare dividends and can pay out dividends despite having accumulated losses.

[KopiKat]

Found something from EDB site. May not be useful but post the links here for reference,

Precision Engineering
Applied Materials on Pg1
Applied Materials, the world’s leading maker of wafer fabrication equipment, manufactures semiconductor equipment in Singapore. It also began an R&D collaboration with A*STAR’s Institute of Microelectronics. The joint laboratory will develop new tools for the growing advanced wafer-level packaging market.

Complex Equipment Supplier Guide
UMS on Pg44

Singapore Aerospace Supplier Guide
Supplier Capability Matrix <pg8>