Maybank Research Pte Ltd

May 13, 2025

UMS Integration (UMSH SP): Poised for QoQ Improvement – Maintain BUY Rating

Investment Thesis: Improving Outlook Justifies BUY Recommendation

UMS Integration’s 1Q25 revenue demonstrated a 7% year-over-year increase, reaching SGD57.6 million, aligning with Maybank’s expectations. This growth was primarily fueled by contributions from a new customer. Although PATMI remained flat due to a weaker USD, the outlook is positive. The contribution from the new customer is expected to increase quarter-over-quarter as production yield improvements continue. Management is targeting SGD1.5 million/week from this new customer by the end of 2025. Revenue from existing customers is also projected to grow slightly year-over-year. Consequently, Maybank maintains a BUY rating with an increased target price (TP) of SGD1.19, pegged to a higher 15x blended FY25/26E P/E from a previous 14x P/E [[1]].

New Customer Impact: Kicking into High Gear

Revenue from Malaysia saw a substantial surge of 287% year-over-year, climbing to SGD9.4 million from SGD2.4 million, driven by the ramp-up in semiconductor component production for a major new customer. The company aims to achieve a revenue target of SGD1.5 million/week by the close of 2025, with current run-rates at SGD0.6-0.65 million/week. Additionally, orders from existing clients are also anticipated to rise modestly in FY25. Overall, revenue is expected to show sequential improvement starting from 2Q25 [[1]].

Margin Pressures: USD Weakness Over Tariffs

With only 30-40% of production costs denominated in USD, the weakening trend of the USD is expected to put pressure on UMS’s margins. Passing on rising input costs to customers may prove challenging. Tariffs are borne by customers, and only 12% of revenue originates from the US [[2]].

Brighter Earnings Outlook: Bottoming Out in FY24

Earnings are believed to have bottomed out in FY24, with improvements expected in subsequent years, particularly as the new major customer commences production, enhancing profitability quarter-over-quarter. A dividend of SGD0.01/share was declared for 1Q25. Key risks include a weakening USD and potential semi-conductor industry tariffs imposed by the US [[2]].

Stock Valuation and Statistics

• Current Share Price: SGD 1.12
• 12m Price Target: SGD 1.19 (+11%)
• Previous Price Target: SGD 1.16
• Rating: BUY

Company Description

UMS manufactures high-precision components and modules found in front-end semiconductor equipment [[3]].

Key Statistics

• 52w high/low (SGD): 1.23/0.93
• 3m avg turnover (USDm): 2.3
• Free float (%): 16.3%
• Issued shares (m): 707
• Market capitalisation: SGD791.6M / USD606M

Major Shareholders

• LUONG ANDY: 4.7%
• GN JONG YUH: 1.8%
• The Vanguard Group, Inc.: N/A

Price Performance

The report includes a price performance chart comparing UMS Integration against the Straits Times Index [[3]].

Financial Highlights

1Q25 Earnings Analysis

A detailed breakdown of UMS’s 1Q25 earnings compared to 1Q24 and 4Q24 is provided [[2]]:

Value Proposition

• UMS specializes in assembling modules and precision engineering for components used in front-end semi-conductor equipment [[3]].
• Entrenched relationship with key customer Applied Materials (AMAT), a market leader in wafer fab equipment [[3]].
• Through subsidiary JEP, expanding precision metals engineering to non-semi-conductor sectors like aerospace [[3]].

Price Drivers and Historical Trends

• Insider purchases from CEO Andy Luong and financial controller Stanley Loh [[3]].
• Revenue fluctuations and customer outlook impacting share price trends [[3]].
• Positive sentiment from customer AMAT affirming stable order volumes [[3]].
• Rallies driven by strong Wafer Fab Equipment demand globally [[3]].

Financial Metrics

• Strong track record of maintaining a net cash balance sheet [[3]].
• Expectation of free cash flow (FCF) supporting dividends [[3]].

Swing Factors

Upside

• Stronger revenue momentum following capacity expansion [[3]].
• Better contributions from Kalf Engineering, Starke, and JEP [[3]].
• Better cost control supporting margins [[3]].

Downside

• Higher labor costs or workforce expansion difficulties [[3]].
• Lower margins due to negative operating leverage if volume falls [[3]].
• Lower dividends may spook yield investors [[3]].

ESG Analysis

UMS’s approach to ESG (Environmental, Social, and Governance) factors is assessed, emphasizing stakeholder feedback, governance, economic performance, product compliance, and customer privacy. Key issues include employee wellbeing, equal opportunities, conflicts of interest, and environmental compliance [[4]].

Material Environmental (E) Issues

• Focus on energy, water, and inputs [[4]].
• Targets for energy and water intensity in manufacturing processes [[4]].
• Management of hazardous waste and recycling efforts [[4]].
• Compliance with EURO V standards for delivery trucks [[4]].

Key Governance (G) Metrics and Issues

• Board composition: independent directors and executive representation [[4]].
• Audit, nominating, and remuneration committees chaired by independent directors [[4]].
• Business ethics and anti-bribery compliance programs [[4]].
• Quarterly dividend policy [[4]].

Material Social (S) Issues

• Workforce diversity and equal-opportunity employment [[4]].
• Localization strategy for overseas operations [[4]].
• Absence of reports on discrimination or exploitative labor practices [[4]].

ESG Ratings and Scores

UMS Holdings (UMSH SP) has an overall ESG score of 48. UMS has an established framework, internal policies, and tangible medium/long-term targets but needs to make headway in improving its quantitative “E” metrics as well as qualitative parameters. UMS’s overall ESG score is 48, which makes its ESG rating below average (average ESG rating = 50) [[5]].

Quantitative Parameters

Qualitative Parameters

• ESG policy: UMS board oversees sustainability issues [[5]].
• Senior management salary linked to ESG targets [[5]].
• Carbon mitigation/water/waste management strategies are in place [[5]].

Targets

Financial Forecasts and Ratios

Growth Ratios

Profitability Ratios

Research Team

The report lists key personnel in economics, FX, strategy, fixed income, portfolio strategy, MIBG sustainability research, and regional equities [[8]].

Disclaimer

This report is for information purposes only and not an offer to sell or a solicitation of an offer to buy securities. It contains forward-looking statements, subject to risks and uncertainties. The report is prepared for the use of Maybank IBG’s clients and may not be reproduced or distributed without prior express written consent [[9], [10]].