MENU

Falling Knife of the Week: UMS Holdings Limited

This week’s Falling Knife features UMS Holdings (SGX: 558). The stock has slumped 17% this week to close at $0.56.

UMS specializes in manufacturing high precision front-end semiconductor components and performs complex electromechanical assembly and final testing services. It serves a diverse range of industries which include the semiconductor, electronic, machine tools, aerospace and oil & gas industries.

Applied Materials (NASDAQ: AMAT), a listed company in the United States, had owned 6% of UMS until recently.

On 2 June this year, Applied Materials sold down its stake in the company from 6% to 5.95%. This was not really a significant change. However, on 5 June, its holdings in UMS went from 5.63% to 4.83%. This was made public on 9 June.

Stock exchange operator Singapore Exchange stipulates that whenever a whole-number percentage change in a significant shareholding occurs, it must be announced. Applied Materials now ceases to be a substantial shareholder of UMS as it holds less than 5% of the company.

The market did not take well to this move, punishing the stock by causing it to decline 14.4% to $0.595 on 10th June.  UMS derives a majority of its revenue from Applied Materials. In 2013, the revenue from Applied Materials accounted for around 80% to90% of UMS’ total revenue.

For the first quarter of 2014, UMS saw revenue of S$34.3 million, a 23% surge from S$27.8 million a year ago. This was on the back of higher semiconductor component sales during the quarter. Net profit was at S$8.6 million, which ballooned 63% from S$5.3 million a year ago.

Currently, the stock is trading at 8 times its historical earnings and has a dividend yield of 7%.

Click here now for your FREE subscription to Take Stock Singapore, The Motley Fool's free investing newsletter. Written by David Kuo, Take Stock Singapore tells you exactly what's happening in today's markets, and shows how you can GROW your wealth in the years ahead.  

The Motley Fool's purpose is to help the world invest, better. Like us on Facebook  to keep up-to-date with our latest news and articles.

The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.