No slowdown seen in FY22F
? 1Q22 revenue was above our/Bloomberg consensus full-year forecast while
1Q22 net profit was in line with our/Bloomberg consensus FY22F forecast.
? UMS has appointed a tax consultant to help resolve the tax matter with the
Malaysian authorities.
? Reiterate Add. UMS is still seeing strong demand from its customers.
1Q22 net profit increased 26% yoy
Despite the higher effective tax rate of 18.6% in 1Q22 (1Q21:10.4%), net profit rose 26%
yoy to S$19.4m in 1Q22. Pre-tax profit jumped 51.0% yoy to S$25.4m in 1Q22
(1Q21:S$16.8m). 1Q22 revenue w as above expectations at 28.5%/26.7% of
our/Bloomberg consensus full-year forecast. 1Q22 net profit was in line with expectations
at 27.0% of our/Bloomberg consensus full-year forecast. 1Q22 revenue climbed 71% due
to continued strength in the semicon business and the consolidation of JEP Holdings Ltd’s
revenue (acquired in 2021). Pre-tax profit margin in 1Q22 improved qoq to 30.0% from
26.0% in 4Q21 but was lower yoy from 34.0% in 1Q21.
Positive outlook
UMS remains positive on its outlook for FY22-23F. The company notes that Semiconductor
Equipment and Materials International (SEMI) has commented that global fab equipment
spending for front-end facilities is expected to grow 18.0% yoy in 2022, and that SEMI
expects global fab equipment spending to have another healthy year in 2023. UMS also
highlighted that despite the challenging supply chain environment, its key customer has
recently announced that its outlook for 2022 and beyond is very positive. The group’s new
factory in Penang is scheduled for completion by end-FY22F.
Model changes
We raise our FY22-24F revenue forecasts by 9.6-9.7% given UMS’s strong order book. To
factor in inflationary cost pressure, we adjust gross material margin down to 51.4% in
FY22-24F. We also use 1Q22 effective tax rate as a guide and revised our FY22-24F
effective tax rate assumption to 18.6%. UMS has engaged a tax consultant to help resolve
the tax issue (inability to meet pioneer tax incentive condition) with the Malaysian
authorities. A positive resolution would lower its effective tax rate and lead to potential tax
provision write-back.
Reiterate Add
Our TP remains at S$1.63, based on a target P/E of 14.45x (forward peak P/E multiple of
14.45x achieved in the FY16-18 net profit upcycle) on our FY23F EPS forecast. Potential
re-rating catalysts include stronger-than-expected orders for its semiconductor business,
securing new customers for its new Penang plant and faster-than-expected earnings
recovery for JEP’s aviation business segment. Downside risks include higher raw material
prices (aluminium) arising from the Russia/ Ukraine conflict and failure to renew contract
with key customer.