CGS-CIMB Research analyst William Tng has maintained his “add” call on UMS Holdings and raised his target price to $1.97 from $1.58.
In an Aug 2 report, Tng says this is a “rare 3-year earnings upcycle” for UMS, and expects it to report a minimum 33% y-o-y growth rate for its 2QFY2021 net profit.
“It reported a net profit of $15.4million for 1QFY2021. If we conservatively assume that 2QFY2021 net profit only matched that of 1QFY2021 despite the strong industry outlook, y-o-y net profit growth could hit a minimum of 33% vs. 2QFY2020 net profit of $11.6 million.” Tng writes.
See also: UOB KH maintains 'buy' on UMS due to industry tailwinds
He also notes that according to a Jun 22 update by Semiconductor Equipment and Materials International (SEMI), semiconductor makers will have commenced construction on 19 new high-volume fabs by the end of 2021, and will break ground on another 10 fabs in 2022 to meet the accelerating demand for chips.
As such, SEMI expects equipment spending for these 29 fabs to exceed US$140 billion ($189.5 billion) over the next few years.Given the strong global fab spending, Tng raises his FY2021-23 revenue forecasts for UMS by 5.4%, leading to 6.9-8.5% increase in his earnings per share forecasts.
He notes that potential re-rating catalysts include stronger-than-expected orders for its semiconductor business and faster-than-expected business recovery for JEP, which UMS acquired in June.
On the other hand, he cites Covid-19 related business disruption as the key risk in the short term, and says that UMS will be incorporating JEP’s financials in the release of its 2QFY2021 results, he will revisit the FY2021-23 earnings forecasts after it happens.
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As at 3.42pm, shares of UMS were trading at $1.66, with a price to book ratio of 2.81 and dividend yield of 2.56%.
