The positive outlook on the semiconductor industry has pushed DBS Research Group to maintain its ‘buy’ call on UMS Holdings at a revised target price of $1.37.
“We remain positive on the semiconductor sector, on the back of acceleration of 5G, artificial intelligence (AI) and other technology-driven developments such as Smart Cities and increased demand for data,” analyst Ling Lee Keng says.
Referencing data from SEMI – Semiconductor Equipment Materials International – analyst Ling says semiconductor equipment manufacturing is slated to increase 6% year-on-year in 2020 to US$63.2 billion ($86.8 billion) and 17.4% to US$70 billion in 2021.
In this time, Asia is believed to be the “key powerhouse” for the semiconductor expansion and “is forecast to lead the pack in capital spending in 2020,” Ling writes in an August 14 note.
Meanwhile, spending on dynamic random-access memory and – which store data in a memory cell – is slated to surpass 2019 levels grow by over 20% each in 2021.
Her new target price is up 33 cents or 31.2% from her previous $1.04 call and is believed to give the counter a 16% upside from its $1.18 close on August 13, she writes.
This is pegged to 15x the price-to-earnings on FY21F earnings, rolled forward from FY20F, Ling elaborates.
To Ling, UMS’ results for 2Q2020 end June were “slightly above expectations” following “strong revenue” of $40.3 million – up 35% year-on-year thanks to the robust growth in its semiconductor sector.
Overall, net profit for 1H2020 came in at $22.3 million accounting for 52% of Ling’s FY20F forecasts.
She anticipates earnings to come in stronger in the coming quarters, given the expansions to the semiconductor sector.
“These strong growth figures augur well for UMS, which is a beneficiary of the vibrant chip equipment manufacturing market,” observes ling.
Shares in UMS closed down 10 cents or 8.5% to $1.08.
