Succumb to Changes: UMS Holdings Limited

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UMS Holdings LogoUMS Holdings Limited (SGX: 558) is an investment holding company operating in semiconductor and contract equipment manufacturing (CEM). the Group manufactures and sells high precision front-end semiconductor components; and offers electromechanical assembly and final testing services.

On 2nd of June 2014, UMS hit its all time high of 0.772 with high volume. A day later, price fell around 5.7%, likely due to profit taking from the early entering traders/investors. However, on 5th June, the price further plunged to 0.66, around 9.3%, in a single day. Price took a further dive 2 days later, closing at 0.595 on 10th June. The price closed at 0.56 for the week, a 27.5% drop from its all time high and all these happened within 10 days.

 

UMS price chart 20140610

 

The Group has been doing well since 2009, when they saw “negative” profits attributed to their shareholders. A healthy profit margin of  15% to 24% was seen from 2010 to 2013.

UMS FY profit & loss

The healthy fundamentals of the Group can also be seen in their annual EPS of 6 cents per share and the ability to maintain a gross dividend payout of 5 cents per share since 2011.

UMS FY earnings against dividends

On the shorter term time-frame, UMS was able to maintain an increasing net profit margin which shows that the Group was indeed fundamentally sound.

UMS quarter profit & loss

What Happened

Applied Materials (NASDAQ: AMAT), a listed company in the United States, had owned 6% of UMS. On 2nd June this year, Applied Materials sold down its stake to 5.95% and again on 5th June to 4.83%. The first time when Applied Materials sold its stake, the change was not significant and the impact was not great. However, on the second time, a total of 2.7 million shares was sold and the news, made public on 9th June, was not taken well by the market and UMS was punished with a 27.5% drop in its price from its all time high.

Our Views

Financially, UMS had proven to be doing well both quarterly and annually. However, the majority of UMS’s revenue was derived from Applied Materials, with the sell down of its stake, the Group’s revenues may be affected in the near future. Thus the outcome of the decision makers on how they will bring in more sales to maintain their track records will be crucial and only time (and financial results) will be able to tell.

 

 

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