UMS Holdings

[yenyenpark]

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?

I think not that they never try but little success and somehow AMAT still their biggest customers.. their customer like AMAT is very few after consolidation..

well, i also hope they can perform like Venture Corp.. :p

[heifien91]

^^^ 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..

Haha I've never done much in depth research into AMAT financials but them selling UMS seems like peanuts to finance a 9.3bn dollar deal, but of course every bit counts. A bigger AMAT may indicate more business to UMS, however, we have to remember that TEL has their own suppliers as well. Hence, the new company may now have more options.

(vested)

[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..

Haha I've never done much in depth research into AMAT financials but them selling UMS seems like peanuts to finance a 9.3bn dollar deal, but of course every bit counts. A bigger AMAT may indicate more business to UMS, however, we have to remember that TEL has their own suppliers as well. Hence, the new company may now have more options.

(vested)

if not wrong, AMAT invested in more than 100 companies like they do in UMS.. if 1 cash out 10mil, 100 can cash out 1,000mil

[marandaz]

[quote='yenyenpark' pid='85920' dateline='1402456032']

if not wrong, AMAT invested in more than 100 companies, and UMS probably just 1 of the 100..

So if the hypothesis was true that AMAT is raising capital to fund the takeover of TEL by selling UMS stake, we should also see that AMAT is selling stake in other companies isn't it?

So are we seeing that happening?

[Nick]

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)

I suspect our 'moat' lies in our low cost process rather than any 'loyalty bonus'. We have reported 50% Gross Margins years before any contract with AMAT for Endura in 2010 and generated free cash-flow then. There was little change in margins post 2010. As mentioned earlier, it is best to clarify with the Management the exact nature of the business model and r/s with AMAT. Personally, I don't think we do any form of R&D for them.

The weakness in the share price since the XB can be attributed to the sale of the shares by AMAT. The speculations behind their intentions creates uncertainty. It is up to the individual investor to deal with how he or she reacts to it. If one feels that there is a permanent impairment to the AMAT r/s and the 2017 contract, it would be best to divest and lock in your profits - it has been a great 2 years so I suspect many buddies made huge profits on it. If one feels that this is just an administrative pre-merger move to streamline its ops, then one could accumulate to tap on the higher dividend yield. All I know, most of us will look back on this week with regret in the future - either for not selling or for not buying !

(Vested)

[yenyenpark]

Boston, MA 05/20/2014 (wallstreetpr) – The $24 billion provider of semiconductor equipment and services Applied Materials, Inc. (NASDAQ:AMAT) intends to purchase Tokyo Electron. The company has convened a special stockholder meeting next month to discuss the planned acquisition that it expects to expand its footprint in Asia.

The company is ready to offer $9.3 billion to Tokyo Electron in a takeover bid. If the deal succeeds, it will be AMAT’s biggest takeover transaction in history. It has called stockholders to a special meeting on June 23, during which it hopes to get approval for its planned acquisition.

Shares of Tokyo Electron surged on the news that Applied Materials, Inc. (NASDAQ:AMAT) was plotting a takeover.

Improving market condition

The plan to acquire Tokyo Electron comes a time when Applied Materials noted that business was starting to improve across its various segments, and it expects the trend to continue into the long-term future. In addition to the strong demand for new semiconductor equipment that can meet the emerging needs, Applied Materials, Inc. (NASDAQ:AMAT) said prices have also stabilized while its margins are strong.

As such, the company expects to realize strong revenue and profit growth if only it can enhance its capacity, expand market share and initiate more aggressive cost-saving measures. Therefore, the planned acquisition of Tokyo Electron is considered a step in the right direction.

Encouraging 2Q financial results

Applied Materials, Inc. (NASDAQ:AMAT) reported 2Q2014 results that showed significant performance improvement from a year ago. It expects the future to deliver even better results as it implements its growth strategies.

The company saw its revenue up 19 percent while profit hit a new high in recent times. In the three months period to April 27, AMAT generated revenue of $2.35 billion, up from $1.97 billion in 2Q2013. The increase in revenue had its corresponding impact on the bottom-line as profit shot to $262 million or $0.21 per share, against a loss of $129 million or $0.11 per share.

Future outlook

Buoyed by a strong 2Q, Applied Materials, Inc. (NASDAQ:AMAT) forecast positively for the current quarter. The company expects earnings per share to come between $0.25 and $0.29. However, it expects revenue to remain flat or drop 5 percent sequentially.

According to CEO Gary Dickerson, Applied Materials, Inc. (NASDAQ:AMAT) benefited in 2Q from the rise in demand for new machines as chipmakers seek to deliver high-performance but low-power chips. The CEO expects the demand for such machines to remain strong in 2014 and beyond.

[Nick]

UMS Holdings Ltd | PDF
Is smart money asking us to sell?
UMSH SP / UMSH.SI | REDUCE - Downgrade | S$0.70 /TP: S$0.56▼
Mkt.Cap: US$238.90m | Avg.Daily Vol: US$0.96m | Free Float: 67.90%
Semiconductor | Author(s): William TNG, CFA +65 6210 8676,

▊ UMS started trading on an ex-bonus basis on 5 Jun. In the absence of news flow and with a steady STI, its ex-bonus share price should have been near S$0.728. Instead, share sales by both its major shareholders brought down its share price to S$0.66 on that day’s close. Are the major shareholders signalling a return of the semiconductor industry’s downturn? For prudence’s sake, we revert to 1.19x CY14 P/BV (a still generous valuation at the high end of its last earnings upturn) to value the stock (previously 1.38x, average of last 2 up cycles) and normalise dividends back to 5 Scts. We adjust our EPS for its recently completed 1-for-4 bonus issue and downgrade the stock to Reduce from Hold, with de-rating catalysts expected from a possible earnings downturn in 2H.

What Happened
On the day that its shares started trading on an ex-bonus basis on 5 Jun, major shareholders Andy Luong and Applied Materials (AMAT) sold down their shares. Mr Luong’s stake in UMS is now 21.99% while AMAT’s stake has fallen to 4.83%. Henceforth, AMAT is not obliged to report any further share sales.

What We Think
Mr Luong’s share sale should not surprise the market given his record of selling shares in the company. What may unsettle investors is the cessation of AMAT as a substantial shareholder. We do not know if AMAT is selling its shares purely for share rebalancing after UMS’s bonus issue. The share sales are likely to create two concerns for investors: 1) UMS has a profitable contract with AMAT that will expire in 2017. With AMAT no longer a substantial shareholder, some may fret over a non-renewal of or renewal terms for this contract; and 2) as a major shareholder, Mr Luong may be a more persuasive voice in returning excess cash to shareholders. When he does become a minority shareholder, the board may choose a different path in managing the excess cash, with its associated risks/rewards.

What You Should Do
Management maintains that UMS’s outlook remains strong and any slowdown in 2H may not be as severe as in 2H12. We lower our P/BV target to 1.19x (high end of its last earnings upturn) and cut our DPS to 5 Scts from 6.5/7.0 Scts in the interest of prudence. We downgrade the stock to Reduce from Hold with de-rating catalysts expected from a possible earnings downturn.

https://brokingrfs.cimb.com/BgA89NhZUEM0...968Rk1.pdf

[Boon]

^^^ 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.

There is a website designed specifically for AMAT + TEL merger :

http://www.newglobalinnovator.com/en/

1) From the perspective of ownership alone - my view is - "No" - old companies/subsidiaries could be structured under new combined entity.

From tax efficiency perspective, may be.

2) No

(vested)

[specuvestor]

^^

1) It might have to sell entities if the merger approval is contingent on some anti-trust provisions. Unlikely UMS fall into this.

2) Nope it can be married deal as per my post:

Guys, one naive thought: if any of the above is true then this would definitely be a material non public information meaning that AMAT and Andy recent sells are inside trading which is strictly forbidden and they can be sued for that. It means they need to release this information before making any investment decisions based on this information.
Really don't think they would take such a big reputational and legal risk especially AMAT!

Save for the 193 lots sold by AMAT above 90ct, the rest of the sale by both SSH was abt 67-69.5ct. Why didn't they sell those shares at highest point above 90ct during CB? Possible reason is that they want the bonus shares n stay vested in UMS. The bonus shares when credited to their accounts will replenish to some extent what they sold. So could it be just some profit-taking which also results in increase in shares held by others beside the 2 SSH? Due to the small float of shares, a new SSH may emerge but a co is required by sgx to announce changes in SSH interest only a few days later?

I've also been wondering why AMAT sold a little before XB. I'm thinking it might be liquidity consideration

If they are expecting a new SSH, they would have done a cross. That's not to say that a non solicited one will not emerge

Events next quarter, not to mention 3years, are not considered insider trading. If it is then board of directors all no need to trade Liao

To discuss further on the topic of execution using this as a live example: Assuming AMAT is selling because of what I've described, it is going to be a 3 year process.

Would one buy or sell then since I wouldn't actually even be surprised if UMS current quarter could actually be good. Nick is right. It's about catalyst, timeline and execution. BOTH sellers and buyers can be right if their timeline is different

The weakness in the share price since the XB can be attributed to the sale of the shares by AMAT. The speculations behind their intentions creates uncertainty. It is up to the individual investor to deal with how he or she reacts to it. If one feels that there is a permanent impairment to the AMAT r/s and the 2017 contract, it would be best to divest and lock in your profits - it has been a great 2 years so I suspect many buddies made huge profits on it. If one feels that this is just an administrative pre-merger move to streamline its ops, then one could accumulate to tap on the higher dividend yield. All I know, most of us will look back on this week with regret in the future - either for not selling or for not buying !

(Vested)

[orangetea]

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

Sorry, to play devil's advocate here...

So far the posts i read are trying to justify the character of the CEO and the relationship betwen UMS & their only customer - Fair enough
(But no release of info by company despite the price plunge is not very investor friendly - though they have 2 working days to mandatory disclosure - and why is SGX not asking too is another "?")

I think what is missing here is what is the price this company is valued at.
Because as value investors, we have the holding power, to buy regardless of the manic mr market selling.

Of course, it is human instincts to buy at the lowest possible.

Since blood is already on the street for this company share price (To quote buffett), the question is it a worth while buy to which we will understand how the company is run and someday be run by idiots.

I do hope to see some disclosure prompted by SGX taking the lead.