UMS Holdings

[Boon]

With the benefits of hindsight, the following observations could be drawn on Andy‘s share divestments since 2012, which I find interesting !

1) Sales via open market only – no private placement.
2) Had been disruptive and cause volatility in share price – as “Tiggerbee” has pointed out – but only temporarily, no long term disruptive effects – it didn’t appear that he cared about it ......
3) Timing of his share sales seemed to happen in March/April each year – “the yearly sales” – ha-ha!
4) The latest sale in June 2014 seemed to be an exception in terms of both frequency and volume- an outlier indeed – probably to make up for the low volume in 2013 – ha-ha!
5) On average, he sold about 10 million shares per year over the last 3 years, assuming no further selling for the remaining of this year.
6) He owned 110 million shares in UMS as at beginning of 2012
7) He owned 110 million shares (post-bonus) before selling off another 10 million on 05-June-2014.
8) To enable him to maintain his habit of selling 10 million shares per year on average – he would have to “replenish” his shareholding once every few years - that probably eplains the “bonus issues” – just kidding !
9) Intentionally or not, the timing of his share sales did not appear to have aimed for optimal exit price.
10) As mentioned by “ethys” – timing of his selling has no correlation to the prospects of UMS – but as a whole he has been selling into a “rising market”.
11) Would he stops selling when the tide eventually turned – only time will tell.

(vested)

[Nick]

I guess placements are far more expensive than selling into open market. He did allude in the AGM that the share sales was for personal finance reasons and not 'trading' purposes. As alluded at the start of the thread, if one were to combine the share sales with the high dividend payout ratios and the sale of IMT Group, it would seem he needs quite a fair bit of cash haha ! Should also note that Questworld did sell its huge stake in 2012 too.

(Vested)

[Drizzt]

if you link up most of these events, it gives you an indication that Andy and family is like running away with the money

[Life is a game]

Hmm.... now wondering why the bonus issue. This would probably increase the amount of cash to be paid out and reduce the amount of retained earnings to be used for generating higher return on equity. Unless the company is confident of generating higher earnings going forward to compensate for the increased cash dividends paid or alternatively to reduce dividend payout to maintain the retained earnings, the bonus issue coupled with the sale of shares by the management seems to suggest that return on equity is unlikely to be maintained at current level so rather than leaving the cash in bank it's better off giving out to owners to seek better investments elsewhere. So.... The company share price is likely to remain constant going forward on the assumption that PE remains constant if there is no further expansion plans by the company. The cash out would seems logical as this company is likely to be a dividend generating asset rather than a growth asset in the near future.

I have divested my original holdings and kept only the bonus shares for dividend. Will use the divested capital to seek other value counters.

(Vested)

😇天堂与地狱😈就在当下

[ethys]

I slightly disagree: UMS has seen a strong revenue growth since last year and they should continue to do so this year. Obviously this industry is cyclic so even things can also change quickly in the opposite direction. Anyway I wouldn't say UMS will necessary generate the same CFs and div evey year. PE will also change depending on the industry trend, AMAT relationship with UMS etc.
I don't see the bonus share as a way for Andy to liquidate its shares more easily.
As Boon and Nick mentioned before (actually a few months ago) he seems to be just not as a good investor as he is a CEO.
Key thing for me will be to see whether AMAT sold more shares or not in the next few days. If they don't then I would expect the stock price to recover quickly.
But congats for divesting most of your UMS stocks while keeping the bonus shares. Always good to take its benefits at some points especially if u don't see much more potential!

[Nick]

Never been truly concerned about Andy's share sale. Company has done well over the past 3 years so I know his share sales isn't related to deteriorating fundamentals. The best bit was in 2008 where Andy sold shares at 16 - 20 cents and then the Company bought back shares at 10 - 11 cents. The only 'insider sale' that concerned me was AMAT sale. Sadly we won't know if they had continued to divest their stake till it breaches the 5% mark. Much of UMS earning potential (and growth) boils down to macro factors which are beyond its control. Utilization rates isn't very high and it holds on to $30 million net cash. If there any need for capex to expand its capabilities, the Company can do so without sacrificing its core 5 cent dividend paying capabilities IMO. Note that it managed to maintain its high payouts over the years despite acquiring IMT Group for $28 million and still being debt-free today. Of course, who knows the future - such is the nature of being small player in a cyclical industry - I cannot predict what may come by after 3 months. Assuming the Company pays out 6 cent dividend this year ($25.8 million payout), it works out to 8.9% yield.

(Vested)

[specuvestor]

Allow me to digress a bit: my finance 101 lecturer taught me that stock split, bonus issue has no impact on enterprise value. Observers and practitioners in the market would conclude that is nonsense. There are many signalling effect and market structure inefficiencies at work

For one u can split high rising internet stock without earnings but bonus issue comes from earnings. (Bonus shares are funny money compared to cash dividend but thats another story) Secondly 1:1 stock split means dividend is halved but bonus issue means people expect UMS 0.08cts interim dividend PER SHARE to continue despite increasing share count like "Life is a game" pointed out. Effectively payout ratio actually increases. So there is some signalling effect on what the major shareholders are thinking with bonus issue, and selling stock.

[Nick]

Allow me to digress a bit: my finance 101 lecturer taught me that stock split, bonus issue has no impact on enterprise value. Observers and practitioners in the market would conclude that is nonsense. There are many signalling effect and market structure inefficiencies at work

For one u can split high rising internet stock without earnings but bonus issue comes from earnings. (Bonus shares are funny money compared to cash dividend but thats another story) Secondly 1:1 stock split means dividend is halved but bonus issue means people expect UMS 0.08cts interim dividend PER SHARE to continue despite increasing share count like "Life is a game" pointed out. Effectively payout ratio actually increases. So there is some signalling effect on what the major shareholders are thinking with bonus issue, and selling stock.

I often viewed bonus shares as a 'strange' attempt to increase dividend payout (assuming the company in question wishes to maintain the dividend per share). I assumed the rally in such companies share price is due to investors responding favorably to the prospect of higher dividends backed by higher earnings.

It must be noted that UMS did maintain the 1Q 14 dividend at 1.0 cents despite of the increase in share float post bonus.

[Boon]

The only 'insider sale' that concerned me was AMAT sale. Sadly we won't know if they had continued to divest their stake till it breaches the 5% mark.

If it hasn't breach the 5% mark by the time of bonus shares allotment - they would have to make another SSH disclosure after the allotment .

(vested)

[Boon]

Never been truly concerned about Andy's share sale. Company has done well over the past 3 years so I know his share sales isn't related to deteriorating fundamentals. The best bit was in 2008 where Andy sold shares at 16 - 20 cents and then the Company bought back shares at 10 - 11 cents. The only 'insider sale' that concerned me was AMAT sale. Sadly we won't know if they had continued to divest their stake till it breaches the 5% mark. Much of UMS earning potential (and growth) boils down to macro factors which are beyond its control. Utilization rates isn't very high and it holds on to $30 million net cash. If there any need for capex to expand its capabilities, the Company can do so without sacrificing its core 5 cent dividend paying capabilities IMO. Note that it managed to maintain its high payouts over the years despite acquiring IMT Group for $28 million and still being debt-free today. Of course, who knows the future - such is the nature of being small player in a cyclical industry - I cannot predict what may come by after 3 months. Assuming the Company pays out 6 cent dividend this year ($25.8 million payout), it works out to 8.9% yield.

(Vested)

In the past 10 years from 2005 to 2014, Andy Luong did not sell any shares in 2006, 2009, 2010 and 2011.

Interestingly, his stake in UMS was at 25% back in 2005 - and 10 years after (before selling off another 10 million shares on 05-June-2014) his stake was still at 25% - share buy back at work.

But after the latest 10 million shares sell off - his stake in UMS has fallen below 25% for the first time in 10 years.

http://umsgroup.listedcompany.com/stock_...r_type/DIR

(vested)