SINGAPORE (May 27): Andy Luong, executive chairman of UMS Holdings, has bought shares in the company for the first time in six months. On May 16, he bought 250,000 UMS shares, at an average price of 62.5 cents a share. The last time he bought shares in the company was on Dec 18, when he purchased 250,000 shares for 55.55 cents each.
With the May 16 purchase, Luong now holds a direct stake of just over 3.3 million UMS shares, equivalent to a 0.616% interest, up from 0.57%. He also holds a deemed stake of 107.3 million shares, or a 20.007% interest. His total interest in UMS is now 20.623%, up from 20.58% previously.
Luong’s latest purchase comes just three days after UMS completed a $6.58 million married deal for shares in its associate company, JEP Holdings. On May 13, UMS bought all 43.8 million JEP shares, equivalent to a 10.9% stake, held by another Singapore Exchange-listed entity, Ellipsiz, for 15 cents each. The purchase price was at a 3.8% discount to the May 10 closing price of 15.6 cents.
With these shares from Ellipsiz, UMS now owns a total of 38.8% in JEP, up from 27.9% previously. As this has crossed the mandatory general offer trigger of 30%, UMS is now obliged to offer to buy the remaining shares in JEP at 15 cents each. At 15 cents, JEP is valued at 28.68 times historical earnings, which translates into a market value of $61 million. UMS has no plans to revise this offer price. It is offering to buy over all outstanding JEP warrants at 7.4 cents each.
However, UMS is not planning to take JEP private; it merely wants a bigger stake in JEP. In the event UMS receives acceptances from other JEP shareholders that will lift its total stake to more than 90% — breaching the free-float level of 10% — it will “explore various options” to maintain its listing status.
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“The proposed acquisition of JEP is in line with our group’s overall diversification strategy to tap new growth sectors beyond the semiconductor industry,” says Luong. Last year, UMS, which is in the semiconductor machinery business, bought into JEP, whose focus is in the -aerospace industry.
Luong, who is also executive chairman of JEP, notes that it managed a turnaround between FY2017 and FY2018. For the 12 months ended Dec 31, 2018, JEP recorded earnings of $2.2 million, up 160% from FY2017. Revenue in the same period was flat at $85.9 million. The better bottom line was attributed to lower administrative costs.
While JEP recorded better earnings, UMS did not. For the full year ended Dec 31, 2018, the latter posted earnings of $43.1 million, down 17% y-o-y. Revenue in the same period was down 21% y-o-y to $127.9 million.
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The weakness persisted in the following quarter. For the three months to March 31, UMS reported earnings of $7 million, down 39% y-o-y. Revenue in the same period fell 24% y-o-y to $28.6 million. In its earnings statement, the company blamed the ongoing trade war between the US and China for affecting business sentiment and says the semiconductor market is not immune to it.
In its May 13 statement announcing its offer for the other JEP shares, UMS sees its associate company continuing to grow as a result of the “buoyant” aerospace industry. “This acquisition of JEP will therefore bring us new revenue and profit streams, boosting UMS’s top and bottom lines. As a group, we will also be able to further reap the benefits from enhanced operational synergies and an enlarged customer base,” it says.
