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Shares of UMS Holdings Limited More Than Doubled in 2017: Here’s What You Need to Know About Its Latest Earnings Update

What a year 2017 was for manufacturing companies in Singapore. Strong demand for electronic exports was the main catalyst that led to double-digit or even triple-digit growth in revenues and earnings for many electronics manufacturers. Consequently, many of these companies saw their share prices surge during the year. AEM Holdings Ltd (SGX: AWX) and Venture Corporation Ltd (SGX: V03) for instance, enjoyed a 484% and 107% increase in their share prices, respectively.

Another electronics manufacturer that experienced a spectacular spike in its share price in 2017 was UMS Holdings Limited (SGX: 558); its stock climbed by 109%. The core business of UMS is to provide precision machining components for the manufacturing of semiconductors.

As it was with many other manufacturing companies, UMS had a remarkable 2017. Its revenue jumped by 56% during the year, and its earnings per share more than doubled. Could UMS repeat the feat again in 2018? Here’s how the company fared in the first quarter of this year:

1. Revenue for the first quarter of 2018 contracted by 10% from S$41.8 million a year ago to S$37.5 million. The lower turnover was largely due to a 9% dip in revenue from the company’s semiconductor business from S$40.9 million to S$37.0 million. Unfavourable foreign currency fluctuations also contributed to the lower sales figure.

2. Despite the lower revenue, the company still increased its net profit attributable to shareholders by 2% from S$11.2 million a year ago to S$11.3 million. This was due to higher gross profit margins, as a result of a shift in the company’s product mix and lower taxes due to a tax incentive from its Malaysia subsidiary.

3. Similarly, UMS’s diluted earnings per share was up 2.4% to 2.13 Singapore cents from 2.08 Singapore cents.

4. Below is a table showing the breakdown of the company’s revenue by business segment and by geography:

Source: UMS 2018 first quarter earnings update

5. As of 31 March 2018, UMS had total assets of S$271.4 million and liabilities of S$45.3 million. Shareholders’ equity, therefore, stood at S$226 million.

6. The company ended the reporting quarter with just S$20.3 million in debt and S$40.9 million in cash and equivalents. This puts it in a net cash position of S$20.6 million, and a healthy gearing ratio of just 7%. During the year, its net asset value per share rose 5.7% to 42.41 Singapore cents.

7. UMS generated positive operating cash flow of S$15.2 million, and free cash flow of S$12.0 million. The company also spent S$28.2 million during the quarter to acquire a 28.6% stake in Catalist-listed JEP Holdings Ltd (SGX: 1J4) to diversify its income stream.

8. UMS proposed a dividend of S$0.01 per share, unchanged from the same period a year ago. This equates to a dividend payout ratio of 0.47.

9. On the company’s prospects for the rest of the year, Andy Luong, UMS’s executive chairman and CEO, shared the following comments in the earnings update:

“We are pleased to deliver a profitable start to FY2018 despite the global volatility arising from US-China trade debacle. We are confident that the wave of IOT, AI and big data growth will stay as smart products and smart cities will continue to flourish. UMS, which is a beneficiary of this favourable uptrend, will therefore forge ahead with its expansion plans and efforts to improve performance.”

10. At the time of writing, shares of UMS were trading at S$0.855 apiece. This equates to a price-to-book ratio of 2.01, a price-to-earnings ratio of 8.85, and a trailing dividend yield of 5.55%.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has a recommendation on AEM Holdings Ltd. Motley Fool Singapore contributor Jeremy Chia owns shares in AEM Holdings.