• UMS’s 2Q18 net profit of S$14.5m (+28% y-o-y); in line.
• Margin improvement; possible beneficiary of trade shifts away from China.
• FY18F/FY19F earnings cut by 14%/11%.
• Maintain BUY with lower Target Price of S$1.01.

Maintain BUY With Lower Target Price of S$1.01; Front-end Semiconductor Equipment Play Offering Attractive 8% Yield

UMS Holdings (UMS) has partnered closely with Applied Materials for more than a decade. Notably, despite its exposure to a cyclical industry, UMS’s earnings have been less volatile since it was awarded the Endura contract in 2010. The company also stands out for its strong cash flow generation capabilities and consistent dividends, thus offering both yield and growth. 

In 2018, growth will mainly be supported by a ramp-up in its higher-margin Components business and cost benefits arising from its shift to Penang.

Source: DBS Research - 15 Aug 2018