5 Key Takeaways From UMS Holdings’ Strong Earnings

Semiconductor stock buy

Billy Toh

November 14, 2022

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Semiconductor player, UMS Holdings Limited (SGX: 558), posted its best-ever performance for the first nine months of its financial year performance (9M FY2022).

This came as the company posted record revenue of S$271.4 million and a net profit of S$85.8 million.

The strong performance in the 9MFY2022 was driven by the robust expansion of global wafer fabs.

So, for Singapore technology investors, here are five key highlights from UMS Holdings’ strong earnings numbers during the 9M FY2022.

1. Strong performance across all business segments

The strong revenue growth of 48% to S$271.4 million was led by robust demand across all its business segments.

UMS Holdings’ semiconductor sales were up by 45% to S$238.4 million in the 9MFY2022 as compared to S$164.9 million.

This was mainly driven by the strong performances of its Semiconductor Integrated System sales, which went up by 45% to S$106.6 million and its component sales that jumped by 44% to S$131.7 million.

Meanwhile, aerospace and other revenue also increased by 79% and 70%, respectively.

In terms of its major markets, the best performance came from Malaysia, with revenue growth coming in at 124%. Meanwhile, in Singapore, sales were up by 48% year-on-year (yoy).

Source: UMS Holdings’ 3Q Financial Performance

2. Strong growth momentum continues in the Q3 FY2022

UMS Holdings also showed resilient growth momentum as seen by the increase of 15.5% in revenue in Q3 2022 as compared to the previous quarter.

The semiconductor segment went up by 18% in Q3 FY2022 as compared to Q2 FY2022 while the aerospace and others segment also edged up marginally, by 4% and 2% respectively.

3. Gross margin slightly lower

UMS Holdings’ net profit attributable to shareholders jumped by 73% to an all-time high of S$82 million during the 9M FY2022.

The record high net profit was driven by the Group’s strong sales, improved contributions from other credits which almost doubled.

There was also a reversal of the tax provision made by its Malaysian subsidiary after the resolution of the pioneer tax incentives with the Malaysian government.

The higher foreign exchange (forex) gain from the US Dollar’s appreciation also boosted earnings from other credits and no allowance was made for project losses in the 9M FY2022.

Despite the strong performance, I noted that UMS Holdings’ gross material margin eased to 51.2% in 9M FY2022 as compared to 53.1% in 9M FY2021, amid higher expenses.

4. Strong outlook as global semiconductor manufacturers continue to expand

Management has shared that the expansion of global semiconductor manufacturers, as well as the positive outlook for the aerospace industry, will boost earnings for UMS Holdings.

In the near-term, UMS Holdings has huge order backlog from its key customer to be produced and delivered.

Management also guided that the lower forecast given by its key customer is unlikely to have a significant impact on its performance as UMS Holdings is ready to take on more orders from new customers.

5. UMS’s expansion plans progressing well

UMS management also shared that the Group’s expansion plans have progressed well with the construction of the Penang factory scheduled for completion by the end of this year.

Production is expected to ramp up from the middle of next year.

Aside from that, the improved condition on the shortage of labour in Malaysia has helped to alleviate the manpower crunch in Penang as UMS managed to hire more foreign workers recently.

UMS well-placed to weather semiconductor downturn

UMS Holdings’ strong financial performance and its resilient balance sheet put the company in a good position to weather the semiconductor slowdown.

The expansion plan of the Group and its customers’ diversification strategies bode well for UMS Holdings in the long term but the stock’s valuation could be affected by macroeconomic headwinds.

Downside risks also include the negative impact on its key customer as well as the failure to secure new customers for its new Penang plant.

Investors seemed happy with the financial results as share price jumped by 6.5% to S$1.14 by afternoon today following the results announcement on Friday.

Disclaimer: ProsperUs Investment Coach Billy Toh doesn’t own shares of any companies mentioned.

About the Author: Billy Toh

Billy is passionate about the capital market and believes in investing for the long haul. Prior to this, he was an economist at RHB Investment Bank, covering Thailand and Philippines market. He also worked as a financial journalist at The Edge Malaysia and has experience working with an asset management firm. Aside from the capital market, Billy loves a good conversation over a cup of coffee, is a fitness enthusiast and a tech geek.