UMS Holdings

[valuebuddies]

All newbies buying!! What about the sifus and laojiaos? I tempted to add also but think the sell down might not end yet.

EDIT: I mean forum newbies who might be already very familiar with value investing

[yenyenpark]

In fact all started from AMAT's selling, it could be Andy felt nervous and throw big chunk of his shares. As I said earlier Andy tend to sell regardless good or bad time, so to me just his "panic selling" action. Anyone pick up more when price cheap?

[ vested and do nothing ]

yep bought 250 more lots yesterday @0.64. I never buy at the lowest nor sell at the highest and this has been confirmed one more time
But it's Ok still optimistic on long term. Meanwhile I will still get the dividends. Having said that I would lie to say that I am not a bit worry at the moment when I see the huge volume being traded even today so u might be right Andy possibly selling more stocks. We will see

give u +1 for the courage.. the price is around my BUY target too.. waiting for the vol to go down abit first..

[yenyenpark]

All newbies buying!! What about the sifus and laojiaos? I tempted to add also but think the sell down might not end yet.

EDIT: I mean forum newbies who might be already very familiar with value investing

those laojiaos busy buying lah.. no time to post..

[Boon]

suddenly we see a lot more new members into VB haha. AMAT have probably 2 other contractors and perhaps they want to do away with the single source model. then again they werent single source, they just offer the lowest price because andy is crazy at reducing cost.

the idea seems clearly that ums doesnt have much edge, except that they do it at crazy low cost, to the extent that even the AGM lunch BBQ was done by their own staff!

interesting point that if they want to reduce their share holdings, they should all have done it ex bonus. they cant do it too early because it will create the spook that is now

Hi Drizzt,

Ability of Andy in controlling costs is definitely a competitive advantage that UMS has which would have great impacts on Net Margin.

Again, if UMS doesn't has much edge, how could one explains the High Gross Margin that UMS has got to enjoy since 2010? Unless you are implying that the Gross Margins are not actually considered HIGH ?

(vested)

[Stephentoh]

yea, maybe the sale wont end yet, its 1 for 4 bonus so many still are tempted to sell off their stake in exchange for profits or in fear of the "negative" outlook by the major shareholder sales. But all are still in speculations, let wait for the report and see where the company is still doing well

[passiveincome]

^^^ u have echoed my thoughts previously

Discussions in this thread has generally been pretty constructive. Allow me to answer my own question on what possibly has changed:

1) contract will not be renewed in 2017 and volume will be scaling down next 3 years.

2) merger with Tokyo electron provides a new supplier

3) model transitions,may or may not be related to 18" migration

Actually there is precedent of major shareholder and CEO selling a very successful company at a very wrong time: ASM Pacific (522 HK). The diff is however ASMI parent did not sell.

Hmm... From now till 2017 is 3yrs. It just nice for the technology knowhow transfer, which took 2yrs for UMS, and 1yr to get everything in good order.

However, why will the volume be scale down in next 3yrs? The new supplier is not ready yet.

A side thought. If this is the case, will AMAT assist Andy to get into Tokyo Electron? Or will AMAT throw him aside after 14yrs of cooperation? Or Andy will intend to retire in 2017 and leave UMS with nothing?

With all these selling going on in past few days, will there a new major shareholder appearing?

Hi I've been reading about the views on this forum since last year before I invested in UMS. Everyone's insights are great.

I signed up today because I wanted to contribute some insight. Like most, I'm just as perplexed by the share sales and drop by Amat and the CEO.

I don't think Andy is coming to TEL. I'm from Hermes Epitek (Agent of TEL) and we are in the same situation as UMS. Basically we do not know what is going to happen should the merger go thru. We do not know if Hermes (cant speak for UMS) is going to be absorbed or left in the cold. AMAT has a culture of internalizing all aspects of their business. Unlike TEL who utilize agents to manage the local market. I believe that AMAT will do the same for production and internalize sometime in the future.

I have a few questions about M&A. If anyone has the knowledge pls share.

1) The M&A of AMAT and TEL will create a new entity. Its not going to be a larger AMAT. But a totally new entity. Does this mean that AMAT has to sell stakes or its investments in other companies? Because AMAT will cease to exist?

If that's the case, it makes sense for AMAT to sell right?

2) Also if UMS is going to be bought over, must AMAT sell first then let the new entity buy over?


disclaimer... the above is just my speculation. I'm just in the dark. For all we know merger will fail the regulators requirements.

[Boon]

Rather than taking 2 years for UMS to acquire the technology know how, it probably take about 2 years for UMS supplied parts and Endura system to pass the clean room qualification criteria as the Enduta system and the parts shipped from UMS had to be proven to be not generating foreign particles that are going to end up as killer defects on customers' wafers. The testing system are copied direct from AMAT plants and any engineer trained by AMAT can easily perform the assembly and testing operations. AMAT probably has other vendors supplying the same Endura components and consumables so those parts are already qualified. What I'm saying is that any other existing vendor that's already supplying the parts can easily carry out the assembly and testing operations on the Endura. There are many Taiwanese and Korean companies that are capable of performing such operations. These vendors purchased 2nd hand semiconductor systems to refurb and final test these tools to re sell them to the wafer fabs.

I guess that UMS is supplying parts like the Endura mainframe and chambers as it's not cost effective to ship them from elsewhere. UMS probably also supply other components like skit valves and other moving parts made of aluminum as UMS has the expertise to machine these parts. That explains why their revenue consisted not only of assembly and testing services but also Endura parts and consumables.

In summary, what I'm saying is that the entry barrier is low for existing competitors in the Semicon industry, especially when the IP and specs of the manufactured parts belong to AMAT. So why does AMAT gives most of the orders to UMS in the past and not split the orders among different vendors? Perhaps it's because of Andy's relationship with AMAT senior management, or AMAT does not trust the Taiwanese and Koreans (there are OEM parts available from Korean and Taiwanese suppliers). Perhaps that's why UMS is enjoying a "loyalty margin".

UMS has made a representation that the barrier of entry is HIGH

Our Edge
3. Entrenched Relationship with Top Global Customers
•Serves a select group of leading global corporations (eg, Applied Materials Inc, Schlumberger)
•Deep & continuous collaborative effort from R&D to manufacturing of components to subassembly to surface finishing
•High barrier of entry for competitors
•Management criteria for customer acquisition:
•Earnings accretive
•Healthy and sustainable margin

http://www.set.or.th/th/asean_exchanges/..._ASEAN.pdf

(vested)

UMS to Improve Margin:

UMS is qualified for more than 70 special processes in the production of components for semiconductor equipment manufacturers.
Via the acquisition of the IMT Group (Integrated Manufacturing Technologies Pte. Ltd. (IMT-S) and Integrated Manufacturing Technologies, Inc (IMT-USA), UMS adds vacuum welding and tube bending services to its list of qualified capabilities.

The acquisitions (completed in February 2012) will reduce the subcontracting needs of the company and allow more margin to accrue in-house (starting from mid 1Q to 2Q 2012). More importantly, the lack of qualified vacuum welding and tube bending Applied contractors in the region provides the company with a marginal discriminatory pricing advantage – thus raising barriers of entry to the systems integration services market.

http://umsgroup.listedcompany.com/misc/UMS_050312.pdf

(vested)

[heifien91]

All newbies buying!! What about the sifus and laojiaos? I tempted to add also but think the sell down might not end yet.

EDIT: I mean forum newbies who might be already very familiar with value investing

those laojiaos busy buying lah.. no time to post..

Personally, I do not like to catch a falling knife. Let the price more or less stabilize before buying. Just something I learnt over the few years of investing, the more 'laojiaos' ones would probably have better insights haha.

(vested)

SG Value Investor
http://www.sgvalueinvestor.wordpress.com

[marandaz]

Have not invested...

I am curious as to why UMS, which has been around for so many years, has not make an effort to expand her customer-base leading to her dependence on a single customer i.e. AMAT?

[yenyenpark]

^^^ u have echoed my thoughts previously

Discussions in this thread has generally been pretty constructive. Allow me to answer my own question on what possibly has changed:

1) contract will not be renewed in 2017 and volume will be scaling down next 3 years.

2) merger with Tokyo electron provides a new supplier

3) model transitions,may or may not be related to 18" migration

Actually there is precedent of major shareholder and CEO selling a very successful company at a very wrong time: ASM Pacific (522 HK). The diff is however ASMI parent did not sell.

Hmm... From now till 2017 is 3yrs. It just nice for the technology knowhow transfer, which took 2yrs for UMS, and 1yr to get everything in good order.

However, why will the volume be scale down in next 3yrs? The new supplier is not ready yet.

A side thought. If this is the case, will AMAT assist Andy to get into Tokyo Electron? Or will AMAT throw him aside after 14yrs of cooperation? Or Andy will intend to retire in 2017 and leave UMS with nothing?

With all these selling going on in past few days, will there a new major shareholder appearing?

Hi I've been reading about the views on this forum since last year before I invested in UMS. Everyone's insights are great.

I signed up today because I wanted to contribute some insight. Like most, I'm just as perplexed by the share sales and drop by Amat and the CEO.

I don't think Andy is coming to TEL. I'm from Hermes Epitek (Agent of TEL) and we are in the same situation as UMS. Basically we do not know what is going to happen should the merger go thru. We do not know if Hermes (cant speak for UMS) is going to be absorbed or left in the cold. AMAT has a culture of internalizing all aspects of their business. Unlike TEL who utilize agents to manage the local market. I believe that AMAT will do the same for production and internalize sometime in the future.

I have a few questions about M&A. If anyone has the knowledge pls share.

1) The M&A of AMAT and TEL will create a new entity. Its not going to be a larger AMAT. But a totally new entity. Does this mean that AMAT has to sell stakes or its investments in other companies? Because AMAT will cease to exist?

If that's the case, it makes sense for AMAT to sell right?

2) Also if UMS is going to be bought over, must AMAT sell first then let the new entity buy over?


disclaimer... the above is just my speculation. I'm just in the dark. For all we know merger will fail the regulators requirements.

1) AMAT is paying 9.3bil for Tokyo Electron.. (just read from google news), may be that's why they are cashing out.. but bigger AMAT will give more business to UMS? AMAT is buying TEL, high chance the name will be still AMAT or AM-TE (something like Applied Material-Tokyo Electron) but quite funny the name.. I think AM name is better than TE.. :p

2) UMS is independent... not related to AMAT, may be just supplier-customer relationship..