UMS @ $0.905

Buy @ $0.905

Woah… KK must have gone crazy… buying at such a new high price… 😀

Let's look at the following,

• Industry
  • Cycle remains positive and forecasted to stay positive into 2015 but note that things can change anytime ie. Need to follow up closely on Industry News
  • Reference : Gartner Says Worldwide Semiconductor Capital Equipment Spending to Increase 12.2 Percent in 2014 dated 24 Apr 14
• AMAT (Applied Materials)
  • From the quarterly results, AMAT Order Book has been increasing since Q4 FY2013

 

	Q114	Q413	Q313	Q213	Q113
UMS	34,309	34,455	25,375	32,821	27,845
Q-o-Q	-0.4%	35.8%	-22.7%	17.9%	28.7%
AMAT	Q2 FY2014	Q1 FY2014	Q4 FY2013	Q3 FY2013	Q2 FY2013
Orders	$2.63B	$2.29B	$2.09B	$2.00B	$2.27B
Q-o-Q	15%	9%	5%	-12%	7%
SSG Orders	$1.66B	$1.57B	$1.39B	$1.20B	$1.55B
Q-o-Q	6%	13%	16%	-22%	14%
Net Sales	$1.58B	$1.48B	$1.24B	$1.27B	$1.29B
Q-o-Q	7%	19%	-2%	-1%	33%

 

• This bodes well for UMS as AMAT is their main customer and there's a strong correlation between their business
• Reference : Maybank Report dated 20 Jan 14

 

Comments

• AMAT guidance for Q314 (Jul) is Revenue Flat to -5% but for UMS, their Q214 (Jun) is expected to continue on a robust trajectory
  • Sounds conflicting but it should give a good indication that UMS Q214 Revenue will not be much worse than Q114
  • On the optimistic side, UMS Revenue may see an increase
• Industry cycle is positive at the moment
  • Projected to stay positive till 2015 but have to follow closely
• AMAT gained market share
  • Positive for UMS
  • Bigger gains in 2H14 from the merger with Tokyo Electron but this may or may not translate to bigger business for UMS

Conclusions

• Take a bet at current prices ($0.905) but may be short term as I already have a large holding
  • PE = 10.77 (FY13) or 9.67 (latest 4Qs)
  • Yield = 7.182% (5.525% if Exclude Special Div)
• Highly cyclical industry which can turn anytime, depending on the economy
  • Need to stay vigilant, not meant to buy and hold forever