Remain Positive on Semiconductor

• UMS HOLDINGS (SGX:558) is now witnessing signs of an upturn in the overall semiconductor industry as demand is picking up with chip inventories easing and new technological disruptors driving the growth of new products and capabilities. The successfully renewed integrated system business contract with its key customer, AMAT, for another three years helps to strengthen earnings visibility.
• We remain positive on the turnaround for the semiconductor segment and expect the sales momentum to continue.
• Maintain BUY with a higher Target Price of S$1.08, pegged to smaller peers’ average of 14x PE (Prev 13x), in line of re-rating of peers.

Where We Differ

• We are more positive on the semiconductor outlook and expect UMS to trade in line with its smaller peers’ PE of 14x on FY20F earnings.

Potential Catalysts

• Stronger recovery in semiconductor equipment sales, client diversification, earnings-accretive M&As.

Source: DBS Research - 29 Nov 2019