UMS Holdings

[Nick]

Thanks Boon. As long as 3Q 13 remains profitable (and above 3Q 12 figures), I would expect the usual 1.0 cent quarterly dividend to be maintained. It will be interesting to see if the Company declares a bumper 4Q 13 dividend since they are no longer carrying any debt.

(Vested)

[NTL]

UMS going to surprise alot with their result this quarter, after anouncing possible "breather" at last quarter.

EPS for the quarter stands at 1.4c, and again another 1c dividend.

Most importantly, the following statement is definitely delightful.

"However, going into the last quarter of 2013, the Group expects growth to resume. Similarly, the Group is witnessing stronger orders and increased activities in the last quarter of the year as demands from customers are picking up as compared to 3Q2013. Hence, it is optimistic that the last quarter of this year will be better than that of last year, setting the stage for an optimistic first quarter in 2014."

[Nick]

NET PROFIT SURGED 126% TO S$4.8 MILLION IN 3Q2013, CONTINUES QUARTERLY DIVIDEND OF SINGAPORE 1.0 CENTS

http://infopub.sgx.com/FileOpen/UMSPress...eID=264092 [Press Release]

http://infopub.sgx.com/FileOpen/UMSSGXRe...eID=264093 [SGX Announcement]

1) Gross Margins maintained at > 50% - a key worry in 4Q 2012 was whether the decline in gross margin in that quarter was permanent. The past 3 quarters worth of results indicate otherwise.

2) The CEM division continues to generate little sales. UMS faces dual concentration risk - 1 industry, 1 customer. But I rather it continues to focus expanding its range of services to Applied Materials since that's where its niche lies.

3) FCF continues to be stellar generating over $20 million FCF in 9M 2013. This has increased its net cash from $15 million at the start of the year to $30 million currently. Some of the machines have been fully depreciated so I wonder is the next capex cycle near ?

4) Dividends of 1.0 SG cent declared as expected. I am speculating 4Q dividend will include a special dividend component (like in 2010) if there are no acquisition targets or major capex needs.

5) Good to see the breather is over and normal results will resume in 4Q onwards. This is a pretty volatile industry so I expect UMS results to be good and bad at times.

(Vested)

[Boon]

Comments on 3Q2013 results:
1) The 3Q2013 result is better than what I had expected especially on net profit margin, which came in at 19% (as compared to 9.28% for 3Q2012).
2) Net profit for 9M2013 of SGD 17.902 million has already surpassed that of FY2012 of SGD 16.997 million.
3) FCF generated for 9M2013 = SGD 20.0 million ( about 6 cents per share )
4) Management is witnessing stronger orders and increased activities in 4Q2013 and is optimistic that 4Q2013 results would be better than that of 4Q2012.
5) With no debt, and if there is no M&A activities and no major capex anticipated, I concur with Nick that we may be in for a FY2013 special dividend – payout FCF from 9M2013 ( 6 cents per share ) and retain FCF generated in 4Q2013 which could come in at 1.5 to 2.0 cents per share.

Revenue (SGD million）:
1Q2012 = 31.992
2Q2012 = 36.637
3Q2012 = 22.952 (9M2012 = 91.581)
4Q2012 = 21.631 (FY2012 = 113.212)
1Q2013 = 27.845
2Q2013 = 32.821
3Q2013 = 25.357 (9M2013 = 86.041)
4Q2013 = better than 4Q2012

NPAT (SGD million) :
FY2012 =16.998
1Q2012 = 6.032
2Q2012 = 7.625
3Q2012 = 2.129 (9M2012 = 15.786)
4Q2012 = 1.212
1Q2013 = 5.256
2Q2013 = 7.837
3Q2013 = 4.809 (9M2013 = 17.902)

Gross Profit Margin :
FY2012 = 49%
1Q2012 = 52%
2Q2012 = 49%
3Q2012 = 54%
4Q2012 = 41%
1Q2013 = 49%
2Q2013 = 50%
3Q2013 = 53%

Net Profit Margin :
FY2012 = 15.01%
1Q2012 = 18.85%
2Q2012 = 20.81%
3Q2012 = 9.28%
4Q2012 = 5.60%
1Q2013 = 18.88%
2Q2013 = 23.88% (=21.6% excluding FX gain)
3Q2013 = 19%

Cash & Cash Equivalent (SGD million)
3Q2012 = 33.531 ( debt = 17.735 )
4Q2012 = 32.532 ( debt = 17.238 )
1Q2013 = 28.448 ( debt = 2.035)
2Q2013 = 27.406 ( no debt)
3Q2013 = 30.134 ( no debt)

(Vested)

[Nick]

CIMB has released a report titled - Pop the Champagne - upgrading their TP to $0.65.

9MFY13 core earnings were 93% of consensus and 90% of CIMB forecasts as the 3QFY13 slowdown was not as bad as expected. The fourth quarter looks bright and our 2 Scts DPS assumption will likely materialise. Visibility now extends into 1QFY14.

9MFY13 earnings exceeded consensus estimates as the 3QFY13 slowdown was milder than expected. We raise earnings by 7-20% as strong demand returns. Rolling over to CY14, our target price rises to S$0.65 (1.12x P/BV, the high end of its last earnings upturn cycle). We expect 2 Scts DPS for 4QFY13 – the full-year dividend yield is 9.1%. Maintain Outperform.

Strong 4Q ahead 3QFY13 earnings were driven by a better product mix and lower depreciation charge. For the fourth quarter, UMS expects growth to resume as demand from customers picks up strongly. The industry expert Gartner predicts that 2014 semiconductor capital spending will increase 14.1%, followed by 13.8% growth in 2015. The next cyclical decline will be a mild drop of 2.8% in 2016, followed by a return to growth in 2017. We believe the hurdle to clear is low as UMS reported 4QFY12 net profit of just S$1.2m. We believe UMS could see 27% qoq profit growth to S$6.1m in 4QFY13. UMS is optimistic that the strong demand will continue into 1QFY14.

On track for 2 Scts DPS Backed by the upcoming and likely strong quarter and free cashflow of S$20m, we believe our assumption of 2 Scts DPS for 4QFY13 is realistic. The company has a track record of returning excess cash to shareholders. The FY14-15 dividend yields are an attractive 7.3% (4 Scts DPS) and even more attractive at 9.1% if the 5 Scts DPS payout continues.

Ready for additional orders Major customer Applied Materials purchase of Tokyo Electron will convert the combined entity into the world’s largest semiconductor equipment supplier. UMS could garner a larger share of business from this entity given its proven track record and ready capacity.

https://brokingrfs.cimb.com/tswcgXSs4XVm...9tWnc1.pdf [Report]

Lim & Tan has written a short summary on the results:

 UMSH’s (55 cents, down 1 cent) 3Q’13 net profit rose 126% to $4.8mln, bringing 1H’13 profit up 13% to $17.9mln reflecting higher demand from customers, lower depreciation charges as some assets were fully depreciated, lower forex losses, lower inventory provisions and lower operating costs. UMSH continued to generate strong free cash flows of $20mln for 9 months 2013 versus $22.5mln last year enabling them to sustain the quarterly dividend of 1 cent a share in the past 3 quarters. Financial position remains strong with net cash position of $30mln representing 16% of market cap. Looking ahead, management has turned upbeat on their 4Q13 and 1H14 outlook due to improve order flows from their key customer Applied Materials. UMSH would also be a key beneficiary from the merger between Applied Materials and Tokyo Electron. At an
attractive 9% yield coupled with resumption of growth, we maintain our BUY recommendation.

UMS is currently trading at $0.565 translating to a dividend yield of 8.8%.

(Vested)

[Boon]

Applied Materials 4Q2013 result (ending 27 October 2013) was announced yesterday (14th Nov 2013).

Revenue went down 2.3% QoQ (for SSG)
New order went up 16% QoQ (for SSG)

SSG : Revenue (USD million):
1Q2013 = 969
2Q2013 = 1,291
3Q2013 = 1,272
4Q2013 = 1,243 ( 2.3% lower than 3Q2013)

SSG : New Orders (USD million)
1Q2013 = 1,363
2Q2013 = 1,551
3Q2013 = 1,203
4Q2013 = 1,390 ( 16% higher than 3Q2013)

SSG : Backlog (USD million)
1Q2013 = 1,071
2Q2013 = 1,265
3Q2013 = 1,173
4Q2013 = 1,320 (This is 13% higher than 3Q2013)

Brief summary:
- For AMAT + TEL merger, management remained confident that approval for the merger will be received in the mid to second half of 2014.
- mobility trend remains the main growth driver
- Fiscal 2013 was the year when AMAT built momentum for profitable growth……. “ Today we have positive momentum in our markets as major trends play to our strengths and we have a very strong pipeline of differentiated product to grow our wafer fab equipment share and enter new markets. We have positive momentum with customers and a strong pull for earlier router and deeper collaboration to enable their future devices with our materials engineering solutions.”
- In short, management is positive and optimistic on business outlook going forward.


Applied Materials' CEO Discusses 4Q 2013 Results - Earnings Call

(Transcript)
http://seekingalpha.com/article/1841812-...art=single

(Webcast)
http://seekingalpha.com/article/1834552-...e_readmore
_________________________________________________________________________________________________________________________________________________

Comments:
1) Further confirmation that the “breather” is over for the time being – going forward, if things played out as per Gartner’s report, the next few years are going to be really good for the industry.
2) UMS’s revenue is only about 2% of SSG’s revenue. If AMAT (with or without TEL) could increase it by just another 1% to 3% of SSG’s revenue, it would mean an 50% increase in revenue for UMS – which is very significant.

On the flip side, if it were to be reduced by 1%....................haha! One industry, one customer - this is "Concentration risk" which investors of UMS have to live with.

(Vested)

[Nick]

Thanks for the insights Boon. Always a pleasure reading your comments. Crossing my fingers for special dividends !

(Vested)

[Boon]

Nick,
Special dividend was declared for FY2011 when the net cash position was at SGD 35.682 million. Assuming FCF of 1.5 cents could be generated in 4Q2013, by year end 2013, net cash position would probably reach the SGD 35 million mark again - bench mark level for special dividend - haha!

Unless there are potential M&A activities or major capex for capacity expansion to cater for more work from AMAT (with or without TEL), going by what happened in 2011, chances of special dividend being payout are highly likely, I would say.

Cash & Cash Equivalent (SGD million)
4Q2011 = 37.947 ( debt = 2.265 ) => net cash = 35.682
3Q2013 = 30.134 ( no debt)
4Q2013 (projected) = 30.134 + 343 x 0.015 = 35.279

_______________________________________________________________________________________________________________________________________________

Barcelona, Spain, November 14, 2013
Gartner Says Smartphone Sales Accounted for 55 Percent of Overall Mobile Phone Sales in Third Quarter of 2013
- Western Europe Grew for the First Time this Year
- Lenovo Became the No. 3 Worldwide Smartphone Vendor for the First Time

Worldwide mobile phone sales to end users totaled 455.6 million units in the third quarter of 2013, an increase of 5.7 percent from the same period last year, according to Gartner, Inc. Sales of smartphones accounted for 55 percent of overall mobile phone sales in the third quarter of 2013, and reached their highest share to date.
Worldwide smartphone sales to end users reached 250.2 million units, up 45.8 percent from the third quarter of 2012. Asia/Pacific led the growth in both markets - the smartphone segment with 77.3 percent increase and the mobile phone segment with 11.9 percent growth. The other regions to show an increase in the overall mobile phone market were Western Europe, which returned to growth for the first time this year, and the Americas.
“Sales of feature phones continued to decline and the decrease was more pronounced in markets where the average selling price (ASP) for feature phones was much closer to the ASP affordable smartphones,” said Anshul Gupta, principal research analyst at Gartner. “In markets such as China and Latin America, demand for feature phones fell significantly as users rushed to replace their old models with smartphones.”
Gartner analysts said global mobile phone sales are on pace to reach 1.81 billion units in 2013, a 3.4 percent increase from 2012. “We will see several new tablets enter the market for the holiday season, and we expect consumers in mature markets will favor the purchase of smaller-sized tablets over the replacement of their older smartphones” said Mr. Gupta.
While Samsung’s share was flat in the third quarter of 2013, Samsung increased its lead over Apple in the global smartphone market (see Table 1). The launch of the Samsung Note 3 helped reaffirm Samsung as the clear leader in the large display smartphone market, which it pioneered.............................................................

http://www.gartner.com/newsroom/id/2623415

(vested)

[Nick]

UMS: 3Q Stronger Than Expected (BUY, SGD0.58, TP: SGD0.71)
Edison Chen +65 6232 3892 (edison.chen@sg.oskgroup.com)
OSK DMG 18-Nov-2013

UMS’ 3Q13 results were above expectations, with PATAMI soaring
126% y-o-y to SGD4.8m on SGD25.4m of revenue (+11% y-o-y). In view
of the stronger-than-expected 3Q as well as UMS’ favourable outlook,
we raise our FY13 and FY14 estimates by 24% and 17% respectively.
Maintain BUY, with our DCF-based TP unchanged at SGD0.71 (WACC:
11.9%, terminal growth: 0%).

Earnings beat estimates as expenses drop. In line with expectations,
UMS’ revenue declined 23% q-o-q as global spending on wafer
manufacturing equipment slowed down after two consecutive quarters of
strong demand. However, as depreciation expenses were 36% lower y-o-y
(since some of its assets are fully depreciated) while forex losses slid 75%
y-o-y in view of the absence of an inventory write-off, the group delivered
net profits that beat our estimates.

Industry outlook to pick up again. Although worldwide semiconductor
players’ book-to-bill ratio softened in 3Q (July: 1.00, Aug: 0.98, Sept: 0.97),
we expect it to pick up in 4Q. According to Gartner, while worldwide
spending for semiconductor equipment will decline by 8.5% to USD34.6bn
in 2013, growth will resume from 2014 onwards, with spending rising by
14.9% and 19.6% respectively for the next two years.

Management confident on year ahead. UMS is witnessing stronger
orders and higher demand from customers as it moves further into 4Q13.
The favourable industry outlook for FY14 and beyond also bodes well for
the company. Management is optimistic that the company will have a better
year ahead.

Major customer will be dominant player. The acquisition of Tokyo
Electron (8035 JP, NR) by UMS’ largest customer, Applied Materials
(AMAT US, NR) – contributing close to 90% of the company’s revenue - will
make it a dominant industry player, which will in turn benefit its suppliers.
While we do not expect UMS to gain from this immediately, we see it as the
sole Singapore proxy to this landscape-changing event.

(Vested)

[Boon]

Order has certainly bounced back from its low - a further confirmation that the "breather" is over
_________________________________________________________________________________________________________________________________________________
North American Semiconductor Equipment Industry Posts October 2013 Book-to-Bill Ratio of 1.05

SAN JOSE, Calif. — November 19, 2013 — North America-based manufacturers of semiconductor equipment posted $1.12 billion in orders worldwide in October 2013 (three-month average basis) and a book-to-bill ratio of 1.05, according to the October EMDS Book-to-Bill Report published today by SEMI. A book-to-bill of 1.05 means that $105 worth of orders were received for every $100 of product billed for the month.

The three-month average of worldwide bookings in October 2013 was $1.12 billion. The bookings figure is 13.3 percent higher than the final September 2013 level of $992.8 million, and is 51.4 percent higher than the October 2012 order level of $742.8 million.

The three-month average of worldwide billings in October 2013 was $1.07 billion. The billings figure is 4.9 percent higher than the final September 2013 level of $1.02 billion, and is 8.7 percent higher than the October 2012 billings level of $985.5 million.

“Both equipment orders and billings improved in the October data, resulting in a book-to-bill ratio returning above parity,” said Denny McGuirk, president and CEO of SEMI. "Order activity is well above the figures reported one year ago and point towards on-going investments in advanced process technologies for NAND Flash, microprocessor, and foundry............................................................

http://www.semi.org/en/node/48116?id=highlights

(vested)