UMS Holdings

[Boon]

AR2015 is out.
 
Interestingly, Morgan Stanley Asia still holds 5.55% stake as reported in AR2015 (as compared to 5.33% stake as reported in AR2014) - it used to hold 6.44% (as reported in AR2013) of which 6% was for AMAT.
_______________________________________________________________________________________________________________________

AR2016 is out.

MSA holds 6.32% in UMS 

http://umsgroup.listedcompany.com/misc/a...r-2016.pdf
______________________________________________________________________________________________________________________

[Xiaosaint]

Yo! Just got back from the AGM for UMS. There was much discussion on their recently bought new water treatment original equipment manufacturing company (Kraft Engineering). While it is still in its infant stage, the chairman seems very optimistic about the business. On the other hand, the director was saying their core business in semiconductor manufacturing equipment business would be good at least for the next two years as semiconductor companies around the world are doing well and ramping up capex (industry estimated to increase capex by ~10% for 2017 & 2018)

At current price, it has a dividend yield of ~5.5%. And I think there may still be some upside if their Kraft Engineering business works out but only time will tell.


Sent from my iPhone using Tapatalk

[angtc11]

Yo! Just got back from the AGM for UMS. There was much discussion on their recently bought new water treatment original equipment manufacturing company (Kraft Engineering). While it is still in its infant stage, the chairman seems very optimistic about the business. On the other hand, the director was saying their core business in semiconductor manufacturing equipment business would be good at least for the next two years as semiconductor companies around the world are doing well and ramping up capex (industry estimated to increase capex by ~10% for 2017 & 2018)

At current price, it has a dividend yield of ~5.5%. And I think there may still be some upside if their Kraft Engineering business works out but only time will tell.


Sent from my iPhone using Tapatalk

Hi, can you share more info on the renewal with AMAT? Like have the contract terms changed for the better or worse? 
This should be the main revenue source and more important than the new investment to me. 

Thanks in advance

[Xiaosaint]

Yo! Just got back from the AGM for UMS. There was much discussion on their recently bought new water treatment original equipment manufacturing company (Kraft Engineering). While it is still in its infant stage, the chairman seems very optimistic about the business. On the other hand, the director was saying their core business in semiconductor manufacturing equipment business would be good at least for the next two years as semiconductor companies around the world are doing well and ramping up capex (industry estimated to increase capex by ~10% for 2017 & 2018)

At current price, it has a dividend yield of ~5.5%. And I think there may still be some upside if their Kraft Engineering business works out but only time will tell.


Sent from my iPhone using Tapatalk

Hi, can you share more info on the renewal with AMAT? Like have the contract terms changed for the better or worse? 
This should be the main revenue source and more important than the new investment to me. 

Thanks in advance

Hi, someone did ask about it. The contract renewal is done as a 3 year contract with another potential to renew for another 3 years.

From what I understand from Mr Andy Luong's reply, AMAT wanted some discount on the units for renewing the contract. So in terms of price per unit is lower. He did not share how much lower though but he did mention that they would make up for the profit loss with numbers. Which I believe means they managed to negotiate for supplying 100% of Endura products for AMAT? They are investing on new machines in their Penang factory to expand its capacity and also looking to buy land around the factory area. But it Andy was saying the surrounding lands are either bought by the government already or the owners are asking for extremely high prices (10x more than when he first bought the piece of land for the Penang facility).

Hope this helps


Sent from my iPhone using Tapatalk

[angtc11]

Yo! Just got back from the AGM for UMS. There was much discussion on their recently bought new water treatment original equipment manufacturing company (Kraft Engineering). While it is still in its infant stage, the chairman seems very optimistic about the business. On the other hand, the director was saying their core business in semiconductor manufacturing equipment business would be good at least for the next two years as semiconductor companies around the world are doing well and ramping up capex (industry estimated to increase capex by ~10% for 2017 & 2018)

At current price, it has a dividend yield of ~5.5%. And I think there may still be some upside if their Kraft Engineering business works out but only time will tell.


Sent from my iPhone using Tapatalk

Hi, can you share more info on the renewal with AMAT? Like have the contract terms changed for the better or worse? 
This should be the main revenue source and more important than the new investment to me. 

Thanks in advance

Hi, someone did ask about it. The contract renewal is done as a 3 year contract  with another potential to renew for another 3 years.

From what I understand from Mr Andy Luong's reply, AMAT wanted some discount on the units for renewing the contract. So in terms of price per unit is lower. He did not share how much lower though but he did mention that they would make up for the profit loss with numbers. Which I believe means they managed to negotiate for supplying 100% of Endura products for AMAT? They are investing on new machines in their Penang factory to expand its capacity and also looking to buy land around the factory area. But it Andy was saying the surrounding lands are either bought by the government already or the owners are asking for extremely high prices (10x more than when he first bought the piece of land for the Penang facility).

Hope this helps


Sent from my iPhone using Tapatalk

Thanks xiaosaint. It's good that they can maintain the profits, hopefully the expansion doesn't take a big chunk of the cashflow. In your opinion, was anything else material announced during the AGM that could have caused the share price to spike up?

[Xiaosaint]

Well, during the AGM, many were concern about the new Kraft Engineering business. What type business they are doing, who their main customers are, is there any competitive advantage, whether UMS has to continuously put in money to support its business and if there is any synergy between the 2 companies.

NOTE!!! The notes below are what I gathered from what I heard in the AGM, please do your due diligence as well. And do correct me if I have misstated anything.

What type of business they are doing.

They are original equipment manufacturing company that manufactures equipment for treatment of water. As such there is no recurring income, but rather many 1-time incomes from infrastructure projects.

Who are their customers.

Their main source of customers are the infrastructure projects around the world. Their main specialization is in Electrochlorination of water which is mainly needed by power plants for treatment of water for its cooling water system.

Is there any competitive advantage in the business?

According to the chairman, in terms of technology, the electrochlorination equipment design is generally standardized, so no patents rights filing needed. They do not intend to compress their margins by competing with competitors in price. But they will be building its brand name by focusing on the quality of delivery, e.g. Quality of finished products, speed of product delivery within agreed schedule, warranties and after sales services.

Does UMS have to inject money continuously into Kraft Engineering over the next few years?

From what I gathered, the capital injection should be a one time event. Kraft Engineering's clients usually pay them through progressive payment, with the downpayment upfront and more payments made as the project meets certain pre-agreed milestones. After this cash injection by UMS, Kraft Engineering is expected to be able to complete its projects with a combination of the payments from clients and loans secured from local banks, with the backing of UMS, for its projects. However margins of the Kraft Engineering business is going to be narrower than that of UMS.

Is there synergy between the companies?

UMS is currently letting Kraft Engineering use its currently vacant facilities in Singapore for some of its manufacturing of parts. Going forward, they may explore other ways to work synergistically such as moving some manufacturing of parts to UMS Penang facilities etc. However, due to the scale of the equipments, most of the manufacturing will still have to be done on site. (In my opinion, there is limited synergy on manufacturing side)

Rather the synergy is on the financials. With the diversification into the water treatment business, UMS would have a better cashflow ratings when on the negotiation table with its clients. As such UMS will be on a better price negotiation platform. As for Kraft Engineering, with UMS backing, it would be easier for it to secure loans from local banks.


Sent from my iPhone using Tapatalk

[Boon]

On renewed contract with AMAT:
Decrease in unit price => by how much? We don’t know!
Increase in volume => by how much? We don’t know! The most is up to 100% of Endura system (from 80%)
Not a good sign, have to produce more to maintain same level of profitability.
Overall, it could be worst off than before…………………..
 
On Kalf Engineering:
Please note that it is “Kalf” Engineering and not “Kraft” Engineering.
http://kalf.sg
It remains to be seen how much value would this new business venture add to the Group going forward!
 
Valuation:
IMO, not much upside from the semiconductor business segment, unless AMAT is willing to give more jobs to UMS – going beyond Endura.
If margin squeeze from AMAT could not be adequately compensated or make up with increase in volume, profitability and hence cash flow generated from semiconductor business segment would decrease.
Ability to pay 6 cents DPS would be under threat, unless shortfall could be made up from its new business ventures…………..
Mean while,
DPS has remained flat.
Share price has gone up quite a lot recently.
Dividend yield has come down as a result.
Over valued or undervalued? Only time will tell……………………..
______________________________________________________________________________________________________________________

[barneyonline]

UMS holdings is seriously over valued. I performed discounted cashflow and it shows the price at max should be 0.61. The book to market value is more than 2 times. Revenue is decreasing over time. Just a re-contract from major shareholder trigger the shares to fly up. Nowadays investors really do not know what news are relevant for share price to go up or down.

[shuoyanz]

Yo! Just got back from the AGM for UMS. There was much discussion on their recently bought new water treatment original equipment manufacturing company (Kraft Engineering). While it is still in its infant stage, the chairman seems very optimistic about the business. On the other hand, the director was saying their core business in semiconductor manufacturing equipment business would be good at least for the next two years as semiconductor companies around the world are doing well and ramping up capex (industry estimated to increase capex by ~10% for 2017 & 2018)

At current price, it has a dividend yield of ~5.5%. And I think there may still be some upside if their Kraft Engineering business works out but only time will tell.


Sent from my iPhone using Tapatalk

Hi, can you share more info on the renewal with AMAT? Like have the contract terms changed for the better or worse? 
This should be the main revenue source and more important than the new investment to me. 

Thanks in advance

One of the management also shared that AMAT was not willing to do 5 year contracts anymore. Also, in return for the shorter contract and lower unit price, AMAT would certify the Penang factory (not sure if its for assembly or manufacturing). Management seemed confident that they would maintain their profits by their move to Penang.

[Boon]

1Q2017  Results: (Released on 12-May-2017)
 
Revenue (SGD million):
1Q2014 = 34.309
2Q2014 = 28.689   
3Q2014 = 24.771  
4Q2014 = 22.050   
1Q2015 = 27.467
2Q2015 = 31.043   
3Q2015 = 30.696  
4Q2015 = 21.884
1Q2016 = 20.362
2Q2016 = 23.607 
3Q2016 = 26.082
4Q2016 = 34.153
1Q2017 = 41.760  (+105% compared to 1Q2016 ; + 22% compared to 4Q2016)
 
NPAT (SGD million):
1Q2014 = 8.558
2Q2014 = 7.229    
3Q2014 = 6,465   
4Q2014 = 3.677    
1Q2015 = 7.541
2Q2015 = 8.266    
3Q2015 = 8.531  
4Q2015 = 9.961
1Q2016 = 3.380
2Q2016 = 6.469  
3Q2016 = 6.785
4Q2016 = 5.957
1Q2017 = 11.168  (+230% compared to 1Q2016 ; +  87% compared to 4Q2016)
 
EPS ( SGD Cent ):
1Q2014 = 2.00 (adjusted for bonus issue)
2Q2014 = 1.68    
3Q2014 = 1.27   
4Q2014 = 0.86    
1Q2015 = 1.76
2Q2015 = 1.93    
3Q2015 = 1.99  
4Q2015 = 2.32
1Q2016 = 0.79
2Q2016 = 1.51  
3Q2016 = 1.58
4Q2016 = 1.39
1Q2017 = 2.60
 
Gross Profit Margin (GPM):
1Q2014 = 53%
2Q2014 = 57%
3Q2014 = 54%
4Q2014 = 54%
1Q2015 = 57%
2Q2015 = 57%
3Q2015 = 55%
4Q2015 = 76%
1Q2016 = 60%
2Q2016 = 58%
3Q2016 = 57%
4Q2016 = 46%
1Q2017 = 51%
 
Net Profit Margin (NPM):
1Q2014 = 24.9%
2Q2014 = 25.2%
3Q2014 = 22.1%
4Q2014 = 16.7%
1Q2015 = 27.5%
2Q2015 = 26.6%
3Q2015 = 27.8%
4Q2015 = 45.5%
1Q2016 = 16.6%
2Q2016 = 27.4%
3Q2016 = 26.0%
4Q2016 = 17.4%
1Q2017 = 26.7%
 
FCF Generated (SGD million):
1Q2014 = 10.3
2Q2014 =  3.9    
3Q2014 =  5.7   
4Q2014 =  9.0   
1Q2015 =  6.4
2Q2015 = 12.6    
3Q2015 =  3.5  
4Q2015 =  8.8
1Q2016 =  5.0
2Q2016 =  5.2    
3Q2016 =  9.0
4Q2016 = 12.0
1Q2017 =  6.8
 
Cash & Cash Equivalent (SGD million)
1Q2014 = 39.511
2Q2014 = 36.113 (debt = 5.000) ; Net Cash = 31.113
3Q2014 = 32.947
4Q2014 = 33.792
1Q2015 = 40.801
2Q2015 = 39.607 (no bank borrowing)
3Q2015 = 38.255 (no bank borrowing)
4Q2015 = 38.933 (no bank borrowing)
1Q2016 = 42.780 (no bank borrowing)
2Q2016 = 35.399 (debt = 1.249)
3Q2016 = 39.217 (debt = 0.249)
4Q2016 = 42.620 (debt = 0.249)
1Q2017 = 48.052 (debt = 0.249)     (Cash level at all time high)
 
DPS ( SGD Cent ):
1Q2014 = 1.00
2Q2014 = 1.00   
3Q2014 = 1.00   
4Q2014 = 3.00    (FY2014 = 6.00)
1Q2015 = 1.00
2Q2015 = 1.00    
3Q2015 = 1.00
4Q2015 = 3.00    (FY2015 = 6.00)
1Q2016 = 1.00
2Q2016 = 1.00
3Q2016 = 1.00
4Q2016 = 3.00   (FY2016 = 6.00)
1Q2017 = 1.00
 
Comments:
1) Overall, an impressive set of results - a good start for 2017.
2) Surge in both integrated system sales and component sales in the semiconductor business segment boosted 1Q2017 revenue/NPAT/EPS to a new quarterly records level.
3) The successful renewal of the group’s contract with its key customer by three years from Jan 2017, with the option for a further 3-years into 2023 will boost revenue base and earnings visibility – it is interesting to note that the old contract (expiring mid-2017) had been cancelled 6 months earlier  - the new contract is effective from Jan 2017 – wondering how the new negotiated terms have had impacted the 1Q2017 results.
4) Semicon segment continued to generate good cash flow - the Group would have generated more cash if not for the higher working capital deployed to secure materials for the coming quarters – not sure if it include material of Kalf Engineering?
5) It didn’t appear that any revenue contribution from Kalf Enginnering has been reported in this quarter. Five of its current projects are expected to be completed in the second half of 2017 and will be expected to contribute to the Group’s financial performance in FY2017.
6) UMS has yet to deliver 4 successive good set of quarterly results from its semicon business segment in the same FY, can it make it this year? Will see……..
____________________________________________________________________________________________________________________