With the industry slowing and thereby affecting sales, analysts have trimmed their target prices on UMS Holdings, even though they’ve kept a bullish longer term view on the stock.
UMS, on Feb 28, reported record earnings of $98 million for FY2022 but was still slightly short of some analysts’ estimates.
In his March 2 note, UOB Kay Hian’s John Cheong notes that the company has “turned cautious” in its outlook, with near term demand to soften in the face of an economic slowdown and rising inflation.
“On the flip side, UMS' orderbook remains healthy, and it will continue to expand capacity to meet customer demands,” writes Cheong, who is keeping his “hold” call on the stock but has trimmed his FY2023 earnings forecast by 29% and has reduced his target price to $1.10 from $1.32.
Citing UMS’s management, Jarick Seet of Maybank Securities has pencilled in a rebound in the second half of the current FY2023.
“Despite a weaker short-term outlook, we remain optimistic that its longer term prospects are unchanged, especially as it has gained a new large customer, which should provide growth over the next few years,” writes Seet in his March 1 report.
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Within the local tech sector, Seet’s preference is for Venture Corp, which has a more “resilient” earnings base versus UMS.
For now, Seet advises investors to maintain “hold”, and in the meantime, enjoy the yield of 5.6%, while waiting for an industry recovery, although with a lower target price of $1.11, from $1.33.
UMS shares changed hands at $1.01 as at 3.37pm, down 1.94%.
