SGX Market Strategist, Equity & Fixed Income, Singapore Exchange Ltd (SGX)

Geoff Howie

SGX Market Strategist, Equity & Fixed Income

Asia’s leading multi-asset exchange

Singapore Exchange Ltd (SGX)

Singapore Exchange is Asia’s leading and trusted market infrastructure, facilitating the exchange of capital and ideas to create value for people, businesses and economies. As a multi-asset exchange operating equity, fixed income and derivatives markets to the highest regulatory standards, SGX is a vertically integrated business that provides listing, trading, clearing, settlement, depository and data services.

With about 40% of listed companies and over 80% of listed bonds originating outside of Singapore as well as established linkages across the region and in Europe, SGX is Asia’s most international and connected exchange. Offering a full suite of derivatives products across Asian equity indices, commodities and currencies, SGX is the world’s most liquid international market for the benchmark equity indices of China, India, Japan and ASEAN.

As Asia’s pioneering central counterparty, SGX is globally recognised for its risk management and clearing capabilities, and was one of the first globally to adopt the Principles for Financial Market Infrastructure.

Headquartered in AAA-rated Singapore, SGX has over 800 employees including offices in Beijing, Chicago, Hong Kong, London, New York, Mumbai, San Francisco, Shanghai and Tokyo.

Equity Bottom-Up

<div><em><strong>Non- SGX Report: These equity research reports are not written by the SGX.&nbsp;</strong>SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.</em></div>
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<p>RESULTS UPDATE</p>
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<h2>UMS Holdings</h2>
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<h3>Another record quarter</h3>
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<li>UMS reported 1Q21 results with sales up 42% YoY and PATMI up 44% YoY. Sales were roughly in line with our expectations while profit surpassed our expectations due to operating leverage.</li>
<li>Taking JEP under the wing. UMS now has majority control of JEP Holdings, and will look to increase their stake through the mandatory cash offer. Management does not expect the need for debt financing to purchase the remaining shares.</li>
<li>Maintain OUTPERFORM with raised TP of S$1.51. Recent market momentum has been bearish for tech and semiconductor stocks, creating opportunities for accumulation. Investors can collect a 3.1% yield dividend in the meantime.</li>
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<p><strong>UMS reported 1Q21 results, with sales at S$49.6mn</strong>, up 42% YoY. Gross margins moderated to 53.1% despite a product mix favouring higher margin component sales, Q1 sales represent about 25% of our FY21 estimate. Q1 PATMI of S$15.4mn is 44% higher YoY and is 29% of our FY21F estimate. Management noted that the 30% net profit margin was achieved through operating leverage, as the rise in sales outpaced the rise in operating expenses. Interim dividend of 1.0 Sct is also in line with our FY21 forecast of 4.0 Sct.</p>
<p>The semiconductor bull cycle is underway, with fab equipment spending expected to register 16% growth in 2021 and 12% in 2022 following 16% growth in 2020, according to SEMI. Key customer Applied Materials (AMAT) has also recently provided a 4-year target of their financial performance, where their Semi systems business is expected to grow at 13% CAGR, while the AGS division is expected to grow at 10% CAGR. We note that while the Kokusai Electric acquisition has fallen through, UMS did not see any opportunity to work with the Japanese company, given the stickiness of Japanese supply chains.</p>
<p>UMS has also acquired JEP Holdings co-founder Zee Hoong Huay’s shares, bringing UMS’s ownership of JEP to around 53.8% and triggering a mandatory cash offer. The offer price of S$0.20 is improved from the prior S$0.15/share takeover attempt in 2019, and will cost UMS up to S$38.2mn, in which management expects the financing to largely be done through cash.</p>
<p><strong>Despite Malaysia’s return to lockdown status</strong>, UMS does not expect disruption to its manufacturing activities at the moment, as economic activity did not face any restrictions akin to last year’s lockdown.</p>
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Non- SGX Report: These equity research reports are not written by the SGX.&nbsp;SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.






RESULTS UPDATE




UMS Holdings



Another record quarter




UMS reported 1Q21 results with sales up 42% YoY and PATMI up 44% YoY. Sales were roughly in line with our expectations while profit surpassed our expectations due to operating leverage.
Taking JEP under the wing. UMS now has majority control of JEP Holdings, and will look to increase their stake through the mandatory cash offer. Management does not expect the need for debt financing to purchase the remaining shares.
Maintain OUTPERFORM with raised TP of S$1.51. Recent market momentum has been bearish for tech and semiconductor stocks, creating opportunities for accumulation. Investors can collect a 3.1% yield dividend in the meantime.




UMS reported 1Q21 results, with sales at S$49.6mn, up 42% YoY. Gross margins moderated to 53.1% despite a product mix favouring higher margin component sales, Q1 sales represent about 25% of our FY21 estimate. Q1 PATMI of S$15.4mn is 44% higher YoY and is 29% of our FY21F estimate. Management noted that the 30% net profit margin was achieved through operating leverage, as the rise in sales outpaced the rise in operating expenses. Interim dividend of 1.0 Sct is also in line with our FY21 forecast of 4.0 Sct.
The semiconductor bull cycle is underway, with fab equipment spending expected to register 16% growth in 2021 and 12% in 2022 following 16% growth in 2020, according to SEMI. Key customer Applied Materials (AMAT) has also recently provided a 4-year target of their financial performance, where their Semi systems business is expected to grow at 13% CAGR, while the AGS division is expected to grow at 10% CAGR. We note that while the Kokusai Electric acquisition has fallen through, UMS did not see any opportunity to work with the Japanese company, given the stickiness of Japanese supply chains.
UMS has also acquired JEP Holdings co-founder Zee Hoong Huay’s shares, bringing UMS’s ownership of JEP to around 53.8% and triggering a mandatory cash offer. The offer price of S$0.20 is improved from the prior S$0.15/share takeover attempt in 2019, and will cost UMS up to S$38.2mn, in which management expects the financing to largely be done through cash.
Despite Malaysia’s return to lockdown status, UMS does not expect disruption to its manufacturing activities at the moment, as economic activity did not face any restrictions akin to last year’s lockdown.



















(Non-SGX Report) UMS Holdings: Another Record Quarter

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      <img src='https://api2.sgx.com/sites/default/files/2021-03/Capture_10.PNG' alt='GVT-CEO' />
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    <div class='content-caption'>GVT-CEO</div>
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<p>Thirteen years ago, engineer Julian Ng had a Eureka moment when Lehman Brothers - then the fourth-largest investment bank in the US - went bankrupt.</p>

<p>“The collapse of Lehman Brothers in 2008 and its impact on the financial services industry was particularly memorable,” recalled the Chief Executive Officer of SGX-listed manufacturing solutions and services provider Grand Venture Technology Ltd (GVT).</p>

<p>“I had harboured the impression that those working in the industry had glamorous and cushy jobs, and usually do well. The event showed me that some developments in the sector can come at an enormous cost to the lives of many.”</p>

<p>In contrast, the engineering profession - typically viewed as humdrum, and even stodgy - was a beacon. “I saw how different this industry was - it was down-to-earth, its services benefitted people and improved their lives. It was then that I realised engineering was the right fit for me,” Ng added.</p>

<p>“From that moment, I was inspired to persevere in this field, and to pursue good, honest work in my role.”</p>

<p>Ng, who graduated with a Diploma in Shipbuilding &amp; Offshore Engineering from Singapore’s Ngee Ann Polytechnic in 1993, has amassed two decades of experience in the manufacturing and precision engineering industries.</p>

<p>In 1999, he took a sales and marketing role with Norelco Centreline Holdings, now known as UMS Holdings, before going on to establish manufacturing and precision engineering firm Achieve Manufacturing Solutions in 2005. Achieve was later acquired by Eng Tic Lee Engineering, and listed on SGX Mainboard as ETLA in 2007. Two years later, ETLA was acquired by Electrotech Investments and renamed Frencken Group.</p>

<p>Ng remained as its Sales and Marketing Director until 2014, when he joined GVT in a similar role. He was appointed to GVT’s Board in 2015 before assuming the position of CEO three years later.</p>

<p>“The past seven years has been a journey of self-reflection and growth,” he said. “It has helped develop and strengthen my character, in particular, teaching me to exercise kindness and humility.”</p>

<p>The most satisfying experience in Ng’s career journey was being part of GVT’s pioneer management team - starting the operations from scratch and building it up over the years.</p>

<p>GVT was birthed from a vision to build a local brand name in advanced manufacturing capabilities, he said. “Although the founding team had extensive experience in our respective fields, the GVT name was new. We had to leave our comfort zones, and give up privileges we enjoyed in our previous roles, to embrace change and hard work.”</p>

<p>In this respect, GVT Executive Chairman Ricky Lee has been a huge inspiration. “Ricky has been a role model for us all - when the going was tough at the beginning, he led by example, and demonstrated tenacity and adaptability in the face of adversity,” Ng recalled.</p>

<p>“He also embodies the Group’s values through things said and done - this has inspired me and the whole organisation to better ourselves.”  </p>

<p><strong>Positioning for Growth</strong></p>

<p>Today, GVT is a solutions and services provider for the semiconductor, electronics, analytical life sciences, medical and industrial automation industries. The Group listed on SGX Catalist in 2019.</p>

<p>Its highly experienced team of engineering talent serves a strong global network of established partners and suppliers, with a wide range of engineering, assembly, testing and product life cycle management solutions.</p>

<p>GVT’s manufacturing plants in Singapore, Penang, and Suzhou are backed by the latest automated computer numerical control (CNC) manufacturing technologies, Class 10,000 cleanroom facilities, and a certified quality management system.</p>

<p>The Group has enjoyed rapid growth over the last few years - revenue in the year ended 31 December 2020 has expanded nearly four-fold from 2016, while net asset value per share has surged more than eight-fold over the same period.</p>

<p>To stay abreast of the competition, GVT regularly reviews and renews its technological roadmap to ensure the relevance of the Group’s positioning.</p>

<p>“We’re constantly analysing the market to understand what our competitors are doing, identifying market trends and demand, and customising our capabilities to address those needs,” Ng said.</p>

<p>“We’re not afraid to take risks, and are willing to be the first mover in the industry, as we believe we will become obsolete if we are complacent.”</p>

<p>In particular, GVT’s strategic move into the advanced material machining and ultra-precision engineering fields has enabled the Group to differentiate itself by offering these capabilities, which are traditional strengths of big players in the US and Europe, and not readily available in Southeast Asia, he noted.</p>

<p>The Group has also begun researching into adopting applied technologies in mechatronics - currently only available in Europe - as part of its processes. A fusion of mechanical, electrical, electronic and control engineering, this multidisciplinary field is increasingly integral to the engineering process due to the demands of innovation.</p>

<p>“We’re also on the lookout for suitable opportunities to invest, or co-invest with like-minded partners, in capabilities or areas that complement our current offerings,” he added.</p>

<p>While GVT pursues these goals, it remains mindful of conducting business in ethical and sustainable ways that safeguard the well-being of its staff, the environment, as well as communities that the Group operates in.</p>

<p>“Recognising the resource-intensive nature of the manufacturing industry, we proactively seek to reduce our carbon footprint, such as installing solar panels that will generate solar energy to supplement our energy consumption,” Ng noted.</p>

<p><strong>Future-Proof Manufacturing</strong></p>

<p>Meanwhile, the semiconductor industry - the bread-and-butter of the electronics ecosystem - is facing a supply crunch. “With the acceleration of 5G deployment, and electric vehicles entering the mainstream, demand for semiconductor chips and equipment have surged since last year,” Ng pointed out.</p>

<p>“The demand growth has, in fact, led to a global shortage of computer chips that is impacting diverse industries from automakers to consumer electronics manufacturers.”</p>

<p>COVID-19 and intermittent lockdowns enforced by several countries have further stoked electronics demand. “There is the risk of supply chain disruptions if the pandemic situation worsens and border closures are re-instituted. To mitigate this, customers are stocking up on inventory, which translates into increased orders for us,” he added.</p>

<p>In anticipation of such risks and potential disruptions, GVT had already invested in Industry 4.0, robotics, and automation initiatives several years earlier.</p>

<p>Such enhanced automation capabilities have enabled the Group to operate on a 24x7 production schedule in Singapore, so as to fulfil its customers’ orders in a timely manner, Ng noted.</p>

<p>“We’re also forging ahead with our investments in digitalisation, artificial intelligence and smart manufacturing to optimise efficiency and productivity in all our facilities,” he added.</p>

<p>For Ng, it all boils down to business sustainability - an issue that’s perpetually at the back of his mind.</p>

<p>“During our early years, when we were trying to build a steady revenue stream, I was constantly asking myself, ‘Can we sustain this business?’,” he said.</p>

<p>“Today, while we have expanded, and are establishing our foothold in the industries we are in, I continue to ask myself the same question, as we strive to achieve long-term, sustainable growth.”</p>

<p>Another priority for the Group is talent acquisition and retention. “We in Singapore have a relatively small talent pool, but huge demand for manufacturing talent. While we keep an eye out for new talent to join us, we must also be mindful of costs and manage that prudently,” he said.</p>

<p>To unwind after a stressful day, Ng enjoys going for a long run. For the 49-year-old, managing a business is very like running a marathon. “Both are for the long haul, and require mental focus and tenacity, especially when the going gets rough.”</p>

<p>Staying grounded and putting in an honest day’s work are also part of his key values.</p>

<p>“My advice to my staff remains the same for whatever they set out to do - follow your heart, be humble, and be willing to listen and learn. These characteristics will help you develop as a person and bring you far in your endeavours.”<br><br><br><strong>Grand Venture Technology Ltd</strong></p>

<p>Founded in 2012, Grand Venture Technology is a fast-growing and trusted solutions and services provider for the manufacture of complex precision machining and sheet metal components and modules. Its manufacturing plants in Singapore, Penang and Suzhou are backed by the latest automated computer numerical control (CNC) manufacturing technologies, Class 10,000 cleanroom facilities and a certified quality management system. The Group’s highly experienced and dedicated team of engineering talent serves a strong global network of established partners and suppliers, with a wide range of engineering, assembly, testing and product life cycle management solutions. GVT’s portfolio of customers hail from the semiconductor, electronics, analytical life sciences, medical and industrial automation industries, and represent some of the largest OEMs in their respective markets.</p>

<p>The company website is: <a href="http://www.gvt.com.sg/"><strong>www.gvt.com.sg</strong></a><br><br>
Click <a href="https://www.sgx.com/securities/equities/JLB"><strong>here</strong> </a>for the company's StockFacts page.<br><br>
For the year ended 31 December 2020 financial results, click <a href="https://links.sgx.com/1.0.0/corporate-announcements/X23MPAIGSLBGOTGI/649021_News%20Release%20-%20GVT%20FY20%20Net%20Profit%20Rises%2068.4%20percent%20to%20%245.2M.pdf"><strong>here</strong></a>.<br><br>
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<p><strong>About kopi-C: the Company brew</strong></p>

<p><strong>Text: Jennifer Tan-Stanisic</strong><br><strong>Photo: Company file</strong><br><br><em>kopi-C </em>is a regular column on the SGX Research website that features C-level executives of leading companies listed on Singapore Exchange. These interviews are profiles of senior management aimed at helping investors better understand the individuals who run these corporations.<br><br>
For previous editions of <em>kopi-C: the Company brew,</em> please click <a href="https://www.sgx.com/research-education/market-dialogues">here</a>.  <br><br>
For more information, or if you would like your senior executives to be featured on SGX Market Dialogues, please send suggestions to <a href="https://www.sgx.com/jennifer.t@sgx.com">jennifer.t@sgx.com</a>.</p>
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    GVT-CEO


Thirteen years ago, engineer Julian Ng had a Eureka moment when Lehman Brothers - then the fourth-largest investment bank in the US - went bankrupt.

“The collapse of Lehman Brothers in 2008 and its impact on the financial services industry was particularly memorable,” recalled the Chief Executive Officer of SGX-listed manufacturing solutions and services provider Grand Venture Technology Ltd (GVT).

“I had harboured the impression that those working in the industry had glamorous and cushy jobs, and usually do well. The event showed me that some developments in the sector can come at an enormous cost to the lives of many.”

In contrast, the engineering profession - typically viewed as humdrum, and even stodgy - was a beacon. “I saw how different this industry was - it was down-to-earth, its services benefitted people and improved their lives. It was then that I realised engineering was the right fit for me,” Ng added.

“From that moment, I was inspired to persevere in this field, and to pursue good, honest work in my role.”

Ng, who graduated with a Diploma in Shipbuilding &amp; Offshore Engineering from Singapore’s Ngee Ann Polytechnic in 1993, has amassed two decades of experience in the manufacturing and precision engineering industries.

In 1999, he took a sales and marketing role with Norelco Centreline Holdings, now known as UMS Holdings, before going on to establish manufacturing and precision engineering firm Achieve Manufacturing Solutions in 2005. Achieve was later acquired by Eng Tic Lee Engineering, and listed on SGX Mainboard as ETLA in 2007. Two years later, ETLA was acquired by Electrotech Investments and renamed Frencken Group.

Ng remained as its Sales and Marketing Director until 2014, when he joined GVT in a similar role. He was appointed to GVT’s Board in 2015 before assuming the position of CEO three years later.

“The past seven years has been a journey of self-reflection and growth,” he said. “It has helped develop and strengthen my character, in particular, teaching me to exercise kindness and humility.”

The most satisfying experience in Ng’s career journey was being part of GVT’s pioneer management team - starting the operations from scratch and building it up over the years.

GVT was birthed from a vision to build a local brand name in advanced manufacturing capabilities, he said. “Although the founding team had extensive experience in our respective fields, the GVT name was new. We had to leave our comfort zones, and give up privileges we enjoyed in our previous roles, to embrace change and hard work.”

In this respect, GVT Executive Chairman Ricky Lee has been a huge inspiration. “Ricky has been a role model for us all - when the going was tough at the beginning, he led by example, and demonstrated tenacity and adaptability in the face of adversity,” Ng recalled.

“He also embodies the Group’s values through things said and done - this has inspired me and the whole organisation to better ourselves.”  

Positioning for Growth

Today, GVT is a solutions and services provider for the semiconductor, electronics, analytical life sciences, medical and industrial automation industries. The Group listed on SGX Catalist in 2019.

Its highly experienced team of engineering talent serves a strong global network of established partners and suppliers, with a wide range of engineering, assembly, testing and product life cycle management solutions.

GVT’s manufacturing plants in Singapore, Penang, and Suzhou are backed by the latest automated computer numerical control (CNC) manufacturing technologies, Class 10,000 cleanroom facilities, and a certified quality management system.

The Group has enjoyed rapid growth over the last few years - revenue in the year ended 31 December 2020 has expanded nearly four-fold from 2016, while net asset value per share has surged more than eight-fold over the same period.

To stay abreast of the competition, GVT regularly reviews and renews its technological roadmap to ensure the relevance of the Group’s positioning.

“We’re constantly analysing the market to understand what our competitors are doing, identifying market trends and demand, and customising our capabilities to address those needs,” Ng said.

“We’re not afraid to take risks, and are willing to be the first mover in the industry, as we believe we will become obsolete if we are complacent.”

In particular, GVT’s strategic move into the advanced material machining and ultra-precision engineering fields has enabled the Group to differentiate itself by offering these capabilities, which are traditional strengths of big players in the US and Europe, and not readily available in Southeast Asia, he noted.

The Group has also begun researching into adopting applied technologies in mechatronics - currently only available in Europe - as part of its processes. A fusion of mechanical, electrical, electronic and control engineering, this multidisciplinary field is increasingly integral to the engineering process due to the demands of innovation.

“We’re also on the lookout for suitable opportunities to invest, or co-invest with like-minded partners, in capabilities or areas that complement our current offerings,” he added.

While GVT pursues these goals, it remains mindful of conducting business in ethical and sustainable ways that safeguard the well-being of its staff, the environment, as well as communities that the Group operates in.

“Recognising the resource-intensive nature of the manufacturing industry, we proactively seek to reduce our carbon footprint, such as installing solar panels that will generate solar energy to supplement our energy consumption,” Ng noted.

Future-Proof Manufacturing

Meanwhile, the semiconductor industry - the bread-and-butter of the electronics ecosystem - is facing a supply crunch. “With the acceleration of 5G deployment, and electric vehicles entering the mainstream, demand for semiconductor chips and equipment have surged since last year,” Ng pointed out.

“The demand growth has, in fact, led to a global shortage of computer chips that is impacting diverse industries from automakers to consumer electronics manufacturers.”

COVID-19 and intermittent lockdowns enforced by several countries have further stoked electronics demand. “There is the risk of supply chain disruptions if the pandemic situation worsens and border closures are re-instituted. To mitigate this, customers are stocking up on inventory, which translates into increased orders for us,” he added.

In anticipation of such risks and potential disruptions, GVT had already invested in Industry 4.0, robotics, and automation initiatives several years earlier.

Such enhanced automation capabilities have enabled the Group to operate on a 24x7 production schedule in Singapore, so as to fulfil its customers’ orders in a timely manner, Ng noted.

“We’re also forging ahead with our investments in digitalisation, artificial intelligence and smart manufacturing to optimise efficiency and productivity in all our facilities,” he added.

For Ng, it all boils down to business sustainability - an issue that’s perpetually at the back of his mind.

“During our early years, when we were trying to build a steady revenue stream, I was constantly asking myself, ‘Can we sustain this business?’,” he said.

“Today, while we have expanded, and are establishing our foothold in the industries we are in, I continue to ask myself the same question, as we strive to achieve long-term, sustainable growth.”

Another priority for the Group is talent acquisition and retention. “We in Singapore have a relatively small talent pool, but huge demand for manufacturing talent. While we keep an eye out for new talent to join us, we must also be mindful of costs and manage that prudently,” he said.

To unwind after a stressful day, Ng enjoys going for a long run. For the 49-year-old, managing a business is very like running a marathon. “Both are for the long haul, and require mental focus and tenacity, especially when the going gets rough.”

Staying grounded and putting in an honest day’s work are also part of his key values.

“My advice to my staff remains the same for whatever they set out to do - follow your heart, be humble, and be willing to listen and learn. These characteristics will help you develop as a person and bring you far in your endeavours.”   Grand Venture Technology Ltd

Founded in 2012, Grand Venture Technology is a fast-growing and trusted solutions and services provider for the manufacture of complex precision machining and sheet metal components and modules. Its manufacturing plants in Singapore, Penang and Suzhou are backed by the latest automated computer numerical control (CNC) manufacturing technologies, Class 10,000 cleanroom facilities and a certified quality management system. The Group’s highly experienced and dedicated team of engineering talent serves a strong global network of established partners and suppliers, with a wide range of engineering, assembly, testing and product life cycle management solutions. GVT’s portfolio of customers hail from the semiconductor, electronics, analytical life sciences, medical and industrial automation industries, and represent some of the largest OEMs in their respective markets.

The company website is: www.gvt.com.sg  
Click here for the company's StockFacts page.  
For the year ended 31 December 2020 financial results, click here.  
 

About kopi-C: the Company brew

Text: Jennifer Tan-Stanisic Photo: Company file  kopi-C is a regular column on the SGX Research website that features C-level executives of leading companies listed on Singapore Exchange. These interviews are profiles of senior management aimed at helping investors better understand the individuals who run these corporations.  
For previous editions of kopi-C: the Company brew, please click here.    
For more information, or if you would like your senior executives to be featured on SGX Market Dialogues, please send suggestions to jennifer.t@sgx.com.



Grand Venture Technology: Engineering Cutting-Edge Growth 

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<p><em><strong>Non- SGX Report: These equity research reports are not written by the SGX.</strong>&nbsp;SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.</em></p>
<h2>UMS Holdings</h2>
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<h3>Market leader rallies the troops</h3>
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<li>UMS reported 4Q20 results with sales up 9% YoY (FY20: 25%). FY20 gross margins are up by ~40bps to 53.3%, while profits missed estimates due to goodwill impairments on Kalf Engineering and JEP Holdings.</li>
<li>Extend the lead. Key customer continues raising guidance, with expectations of taking market share from other players. We think UMS may be in store for another year of strong revenue growth, based off the key customer’s comments.</li>
<li>Maintain OUTPERFORM with raised TP of S$1.43. We see further upside from a recovery in associate contributions, better than expected margins and additional news on expansion initiatives.</li>
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<p><strong>UMS reported 4Q20 results on 25 February 2021, with 4Q20 sales at S$44.1mn, up 9% YoY (FY20: S$164.4mn, +24.7% YoY).</strong> Gross margins moderated to 53.3%, up 40bps vs FY19. The semiconductor business slightly outperformed our expectations while the non-semiconductor business underperformed, with goodwill impairment on Kalf Engineering as well as JEP Holdings. Excluding one-off losses, FY20 profit would have been S$46mn, slightly above our estimate.</p>
<p><strong>Wafer Fab Equipment growth forecasts in 2021 range from +4% (SEMI) to +12% (VLSI).</strong> Meanwhile, key customer Applied Materials (AMAT) has continued providing forward forecasts that are above consensus estimates, leading to further consensus upgrades. Semi systems’ 2QFY21 forecast of US$3.85bn is now the highest ever in the company’s history, and AMAT’s CEO expects “to again grow faster than the market for the year as a whole”. Upgraded consensus sales estimates for AMAT is now +26% for FY21 (ending October 2021) with Physical Vapor Deposition (PVD) products to lead the company’s growth, with management expecting over 40% YoY growth in 2021.</p>
<p><strong>We are increasingly bullish on the semiconductor capital equipment industry as news on chip shortages continue to surface.</strong> UMS management’s decision to cut dividend is in line with the increasing possibility of a new customer win, which will lead to further Capex spend and improved revenue diversification. However, earnings growth might be capped from the expiry of the Malaysia pioneer tax status that UMS has benefitted from since 2010.</p>
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Non- SGX Report: These equity research reports are not written by the SGX.&nbsp;SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.
UMS Holdings



Market leader rallies the troops





UMS reported 4Q20 results with sales up 9% YoY (FY20: 25%). FY20 gross margins are up by ~40bps to 53.3%, while profits missed estimates due to goodwill impairments on Kalf Engineering and JEP Holdings.
Extend the lead. Key customer continues raising guidance, with expectations of taking market share from other players. We think UMS may be in store for another year of strong revenue growth, based off the key customer’s comments.
Maintain OUTPERFORM with raised TP of S$1.43. We see further upside from a recovery in associate contributions, better than expected margins and additional news on expansion initiatives.




UMS reported 4Q20 results on 25 February 2021, with 4Q20 sales at S$44.1mn, up 9% YoY (FY20: S$164.4mn, +24.7% YoY). Gross margins moderated to 53.3%, up 40bps vs FY19. The semiconductor business slightly outperformed our expectations while the non-semiconductor business underperformed, with goodwill impairment on Kalf Engineering as well as JEP Holdings. Excluding one-off losses, FY20 profit would have been S$46mn, slightly above our estimate.
Wafer Fab Equipment growth forecasts in 2021 range from +4% (SEMI) to +12% (VLSI). Meanwhile, key customer Applied Materials (AMAT) has continued providing forward forecasts that are above consensus estimates, leading to further consensus upgrades. Semi systems’ 2QFY21 forecast of US$3.85bn is now the highest ever in the company’s history, and AMAT’s CEO expects “to again grow faster than the market for the year as a whole”. Upgraded consensus sales estimates for AMAT is now +26% for FY21 (ending October 2021) with Physical Vapor Deposition (PVD) products to lead the company’s growth, with management expecting over 40% YoY growth in 2021.
We are increasingly bullish on the semiconductor capital equipment industry as news on chip shortages continue to surface. UMS management’s decision to cut dividend is in line with the increasing possibility of a new customer win, which will lead to further Capex spend and improved revenue diversification. However, earnings growth might be capped from the expiry of the Malaysia pioneer tax status that UMS has benefitted from since 2010.














(Non-SGX Report) UMS Holdings: Market Leader Rallies the Troops

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<li>
<strong>Since the end of 2019, global technology indices have gained 50%, with Singapore’s 10 most traded technology stocks keeping pace with the global trend, also averaging a 50% total return. The 10 stocks have averaged 15% gains in the 2021 YTD.</strong><br>
	 </li>
	<li>
<strong>The 10 stocks have also seen similar increases in their P/E and P/B valuations to their global peers, with P/E and P/B ratios ~25% higher than end of 2019 levels. This has coincided with widespread increased demand for technology products and services, in addition to the widening field of technology application.</strong><br>
	 </li>
	<li><strong>Since 2019, Nanofilm and Aztech Global have listed on SGX. Since listing, Nanofilm has generated an 80% gain, while Aztech Global debuted recently on 12 March with an issue price of S$1.28. Together, the two debutants have a combined market value of S$4 billion. </strong></li>
</ul>
<p> </p>

<p>Since the end of 2019, global technology indices have gained 50%, with widespread increased demand for technology products and services, in addition to the widening field of technology application. Despite technology stocks recently outpacing broader benchmarks, on an earnings basis, and in terms of book value, valuations of the largest technology stocks have increased in-line with the world’s biggest stocks, excluding technology plays. The Technology Sector has doubled its impact in most global indices over the past 10 years.<br><br>
As illustrated below, Singapore’s most traded Technology stocks, which are largely manufacturing-related businesses have seen increases in their P/E and P/B ratios since the end of 2019 that are also largely in line with global peers. These stocks include AEM Holdings, Venture Corporation, UMS Holdings, ISDN Holdings, Frencken Group, Fu Yu Corporation, CSE Global and Valuetronics.</p>
</body></html>

<figure>
      <img src='https://api2.sgx.com/sites/default/files/2021-03/Capture%201_10.PNG' alt='Median values' />
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    <div class='content-caption'>Median values</div>
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<p>While the valuations of the aforementioned eight technology stocks have moved much in-line with the largest global technology stocks, the performances were also on par with the eight stocks averaging 50% total returns since the end of 2019.  In the interim both Nanofilm Technologies International and Aztech Global have listed in Singapore. Since listing, Nanofilm Technologies International has generated an 80% gain, whilst Aztech Global debuted recently on 12 March with an issue price of S$1.28. For more details on Aztech Global, click <a href="https://www.sgx.com/research-education/market-updates/20210312-aztech-global-delighting-https:/www.sgx.com/research-education/market-updates/20210312-aztech-global-delighting-people-smarter-solutions-debutspeople-smarter-solutions-debuts">here</a>.</p>

<table class="table table-striped"><tbody>
<tr>
<td>
			<p><strong>10 Most Traded Technology Stocks in 2021 YTD</strong></p>
			</td>
			<td>
			<p><strong>Code</strong></p>
			</td>
			<td>
			<p><strong>Market Cap S$M</strong></p>
			</td>
			<td>
			<p><strong>Total Return Since End of 2019 % </strong></p>
			</td>
			<td>
			<p><strong>Total Return YTD%</strong></p>
			</td>
			<td>
			<p><strong>Net Insti Inflow YTD S$M</strong></p>
			</td>
			<td>
			<p><strong>Net Insti Inflow 2020 S$M</strong></p>
			</td>
		</tr>
<tr>
<td>
			<p>AEM</p>
			</td>
			<td>
			<p>AWX</p>
			</td>
			<td>
			<p>1,077</p>
			</td>
			<td>
			<p>97.9</p>
			</td>
			<td>
			<p>13.3</p>
			</td>
			<td>
			<p>-29.8</p>
			</td>
			<td>
			<p>16.4</p>
			</td>
		</tr>
<tr>
<td>
			<p>Venture</p>
			</td>
			<td>
			<p>V03</p>
			</td>
			<td>
			<p>5,597</p>
			</td>
			<td>
			<p>24.4</p>
			</td>
			<td>
			<p>-0.7</p>
			</td>
			<td>
			<p>-82.4</p>
			</td>
			<td>
			<p>168.6</p>
			</td>
		</tr>
<tr>
<td>
			<p>UMS</p>
			</td>
			<td>
			<p>558</p>
			</td>
			<td>
			<p>667</p>
			</td>
			<td>
			<p>27.9</p>
			</td>
			<td>
			<p>15.7</p>
			</td>
			<td>
			<p>13.9</p>
			</td>
			<td>
			<p>18.6</p>
			</td>
		</tr>
<tr>
<td>
			<p>ISDN</p>
			</td>
			<td>
			<p>I07</p>
			</td>
			<td>
			<p>276</p>
			</td>
			<td>
			<p>181.2</p>
			</td>
			<td>
			<p>56.8</p>
			</td>
			<td>
			<p>0.4</p>
			</td>
			<td>
			<p>-3.3</p>
			</td>
		</tr>
<tr>
<td>
			<p>Nanofilm</p>
			</td>
			<td>
			<p>MZH</p>
			</td>
			<td>
			<p>3,083</p>
			</td>
			<td>
			<p>N/A</p>
			</td>
			<td>
			<p>5.9</p>
			</td>
			<td>
			<p>-25.6</p>
			</td>
			<td>
			<p>-30.2</p>
			</td>
		</tr>
<tr>
<td>
			<p>Frencken</p>
			</td>
			<td>
			<p>E28</p>
			</td>
			<td>
			<p>606</p>
			</td>
			<td>
			<p>58.5</p>
			</td>
			<td>
			<p>7.6</p>
			</td>
			<td>
			<p>6.1</p>
			</td>
			<td>
			<p>9.9</p>
			</td>
		</tr>
<tr>
<td>
			<p>Aztech Global</p>
			</td>
			<td>
			<p>8AZ</p>
			</td>
			<td>
			<p>959</p>
			</td>
			<td>
			<p>N/A</p>
			</td>
			<td>
			<p>N/A</p>
			</td>
			<td>
			<p>-13.6</p>
			</td>
			<td>
			<p>N/A</p>
			</td>
		</tr>
<tr>
<td>
			<p>Fu Yu</p>
			</td>
			<td>
			<p>F13</p>
			</td>
			<td>
			<p>230</p>
			</td>
			<td>
			<p>26.4</p>
			</td>
			<td>
			<p>15.1</p>
			</td>
			<td>
			<p>48.1</p>
			</td>
			<td>
			<p>1.3</p>
			</td>
		</tr>
<tr>
<td>
			<p>CSE Global</p>
			</td>
			<td>
			<p>544</p>
			</td>
			<td>
			<p>274</p>
			</td>
			<td>
			<p>2.9</p>
			</td>
			<td>
			<p>13.8</p>
			</td>
			<td>
			<p>7.3</p>
			</td>
			<td>
			<p>-19.4</p>
			</td>
		</tr>
<tr>
<td>
			<p>Valuetronics</p>
			</td>
			<td>
			<p>BN2</p>
			</td>
			<td>
			<p>272</p>
			</td>
			<td>
			<p>-19.2</p>
			</td>
			<td>
			<p>5.9</p>
			</td>
			<td>
			<p>-0.3</p>
			</td>
			<td>
			<p>-20.1</p>
			</td>
		</tr>
<tr>
<td>
			<p><strong>Average</strong></p>
			</td>
			<td>
			<p><strong> </strong></p>
			</td>
			<td>
			<p><strong> </strong></p>
			</td>
			<td>
			<p><strong>50.0</strong></p>
			</td>
			<td>
			<p><strong>14.8</strong></p>
			</td>
			<td>
			<p><strong> </strong></p>
			</td>
			<td>
			<p><strong> </strong></p>
			</td>
		</tr>
<tr>
<td>
			<p><strong>Total</strong></p>
			</td>
			<td>
			<p><strong> </strong></p>
			</td>
			<td>
			<p><strong>13,043</strong></p>
			</td>
			<td>
			<p><strong> </strong></p>
			</td>
			<td>
			<p><strong> </strong></p>
			</td>
			<td>
			<p><strong>-75.8</strong></p>
			</td>
			<td>
			<p><strong>141.8</strong></p>
			</td>
		</tr>
</tbody></table>
<p> Note table does not include REITs and Business Trusts that invest in hi-tech assets, and also does not include Sunningdale Tech which is suspended. Data as of 16 March and sourced from SGX, Refinitiv and Bloomberg.</p>
</body></html>






Since the end of 2019, global technology indices have gained 50%, with Singapore’s 10 most traded technology stocks keeping pace with the global trend, also averaging a 50% total return. The 10 stocks have averaged 15% gains in the 2021 YTD. 
	 
	
The 10 stocks have also seen similar increases in their P/E and P/B valuations to their global peers, with P/E and P/B ratios ~25% higher than end of 2019 levels. This has coincided with widespread increased demand for technology products and services, in addition to the widening field of technology application. 
	 
	Since 2019, Nanofilm and Aztech Global have listed on SGX. Since listing, Nanofilm has generated an 80% gain, while Aztech Global debuted recently on 12 March with an issue price of S$1.28. Together, the two debutants have a combined market value of S$4 billion. 

 

Since the end of 2019, global technology indices have gained 50%, with widespread increased demand for technology products and services, in addition to the widening field of technology application. Despite technology stocks recently outpacing broader benchmarks, on an earnings basis, and in terms of book value, valuations of the largest technology stocks have increased in-line with the world’s biggest stocks, excluding technology plays. The Technology Sector has doubled its impact in most global indices over the past 10 years.  
As illustrated below, Singapore’s most traded Technology stocks, which are largely manufacturing-related businesses have seen increases in their P/E and P/B ratios since the end of 2019 that are also largely in line with global peers. These stocks include AEM Holdings, Venture Corporation, UMS Holdings, ISDN Holdings, Frencken Group, Fu Yu Corporation, CSE Global and Valuetronics.



      
    
    Median values


While the valuations of the aforementioned eight technology stocks have moved much in-line with the largest global technology stocks, the performances were also on par with the eight stocks averaging 50% total returns since the end of 2019.  In the interim both Nanofilm Technologies International and Aztech Global have listed in Singapore. Since listing, Nanofilm Technologies International has generated an 80% gain, whilst Aztech Global debuted recently on 12 March with an issue price of S$1.28. For more details on Aztech Global, click here.




			10 Most Traded Technology Stocks in 2021 YTD
			
			
			Code
			
			
			Market Cap S$M
			
			
			Total Return Since End of 2019 % 
			
			
			Total Return YTD%
			
			
			Net Insti Inflow YTD S$M
			
			
			Net Insti Inflow 2020 S$M
			
		


			AEM
			
			
			AWX
			
			
			1,077
			
			
			97.9
			
			
			13.3
			
			
			-29.8
			
			
			16.4
			
		


			Venture
			
			
			V03
			
			
			5,597
			
			
			24.4
			
			
			-0.7
			
			
			-82.4
			
			
			168.6
			
		


			UMS
			
			
			558
			
			
			667
			
			
			27.9
			
			
			15.7
			
			
			13.9
			
			
			18.6
			
		


			ISDN
			
			
			I07
			
			
			276
			
			
			181.2
			
			
			56.8
			
			
			0.4
			
			
			-3.3
			
		


			Nanofilm
			
			
			MZH
			
			
			3,083
			
			
			N/A
			
			
			5.9
			
			
			-25.6
			
			
			-30.2
			
		


			Frencken
			
			
			E28
			
			
			606
			
			
			58.5
			
			
			7.6
			
			
			6.1
			
			
			9.9
			
		


			Aztech Global
			
			
			8AZ
			
			
			959
			
			
			N/A
			
			
			N/A
			
			
			-13.6
			
			
			N/A
			
		


			Fu Yu
			
			
			F13
			
			
			230
			
			
			26.4
			
			
			15.1
			
			
			48.1
			
			
			1.3
			
		


			CSE Global
			
			
			544
			
			
			274
			
			
			2.9
			
			
			13.8
			
			
			7.3
			
			
			-19.4
			
		


			Valuetronics
			
			
			BN2
			
			
			272
			
			
			-19.2
			
			
			5.9
			
			
			-0.3
			
			
			-20.1
			
		


			Average
			
			
			 
			
			
			 
			
			
			50.0
			
			
			14.8
			
			
			 
			
			
			 
			
		


			Total
			
			
			 
			
			
			13,043
			
			
			 
			
			
			 
			
			
			-75.8
			
			
			141.8
			
		

 Note table does not include REITs and Business Trusts that invest in hi-tech assets, and also does not include Sunningdale Tech which is suspended. Data as of 16 March and sourced from SGX, Refinitiv and Bloomberg.



Singapore Technology Stocks Keep Pace with Big Global Peers 

<div>
<div>
<div>
<div>
<p><em><strong>Non- SGX Report: These equity research reports are not written by the SGX.&nbsp;</strong>SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.</em></p>
<h2>UMS Holdings Limited</h2>
<div>
<div>
<div>
<div>
<h3>Growth trajectory to continue in 2021</h3>
<p></p>
<div>
<div>
<div>
<div>
<p><strong>Accelerated demand drove FY2020’s topline.</strong> FY2020’s revenue rose 24.7% yoy to S$164.4m, underpinned by a strong 26.8% growth in the semiconductor segment. Net profit, however, was dragged down by S$1.1m goodwill impairment at 51%-owned Kalf, and S$5.9m writedown in the value of 40.7%-owned JEP. Excluding these, net profit would be S$43.0m, 30.0% higher yoy.</p>
<p><strong>Gross margin improved by 0.4% ppt to 53.3% in FY2020.</strong> We expect continued growth of the semiconductor segment with strong systems and component sales stemming from higher chip demand.</p>
<p><strong>Strong semiconductor demand to persist.</strong> The World Semiconductor Trade Statistics projected that chip sales will rise by 8.4% to hit US$461bn in 2021. This is in line with SEMI’s forecasts for semiconductor manufacturing equipment sales to reach US$71.9bn in 2021 and US$76.1bn in 2022, 3% and 4% higher yoy respectively. The chip industry is currently facing a shortage, so much so that US President Biden has signed an executive order to address the issue. The world’s largest chip foundry, TSMC has set a capex budget of US$25bn to US$28bn for 2021, up from US$17.2bn in 2020.</p>
<p><strong>Foothold in the supply chain.</strong> UMS’ major customer is Applied Materials, a market leader in semiconductor equipment manufacturing with a market share of approximately 15%. TSMC, in turn, is a major customer of Applied Materials. Applied Materials’ Q1FY21 revenue grew by 24% to US$5.2bn. According to Bloomberg consensus estimates, Applied Materials’ is expected to grow revenue by 26.1% and net profit by 44.6% in FY2021E.</p>
<p><strong>Maintain BUY at a higher target price of S$1.38.</strong> Our target price is based on a FY21E P/E of 16.9x, in line with the Singapore sector average P/E. We expect the semiconductor growth to continue in 2021, with the adoption of technologies leading to increased demand for advanced chipsets in automotive, medical and consumer electronics. Our target price implies a 25.5% upside to the last traded price.</p>
<p><strong>Key Risks:</strong> Customer concentration, supply chain disruption, FX risk</p>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>





Non- SGX Report: These equity research reports are not written by the SGX.&nbsp;SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.
UMS Holdings Limited




Growth trajectory to continue in 2021





Accelerated demand drove FY2020’s topline. FY2020’s revenue rose 24.7% yoy to S$164.4m, underpinned by a strong 26.8% growth in the semiconductor segment. Net profit, however, was dragged down by S$1.1m goodwill impairment at 51%-owned Kalf, and S$5.9m writedown in the value of 40.7%-owned JEP. Excluding these, net profit would be S$43.0m, 30.0% higher yoy.
Gross margin improved by 0.4% ppt to 53.3% in FY2020. We expect continued growth of the semiconductor segment with strong systems and component sales stemming from higher chip demand.
Strong semiconductor demand to persist. The World Semiconductor Trade Statistics projected that chip sales will rise by 8.4% to hit US$461bn in 2021. This is in line with SEMI’s forecasts for semiconductor manufacturing equipment sales to reach US$71.9bn in 2021 and US$76.1bn in 2022, 3% and 4% higher yoy respectively. The chip industry is currently facing a shortage, so much so that US President Biden has signed an executive order to address the issue. The world’s largest chip foundry, TSMC has set a capex budget of US$25bn to US$28bn for 2021, up from US$17.2bn in 2020.
Foothold in the supply chain. UMS’ major customer is Applied Materials, a market leader in semiconductor equipment manufacturing with a market share of approximately 15%. TSMC, in turn, is a major customer of Applied Materials. Applied Materials’ Q1FY21 revenue grew by 24% to US$5.2bn. According to Bloomberg consensus estimates, Applied Materials’ is expected to grow revenue by 26.1% and net profit by 44.6% in FY2021E.
Maintain BUY at a higher target price of S$1.38. Our target price is based on a FY21E P/E of 16.9x, in line with the Singapore sector average P/E. We expect the semiconductor growth to continue in 2021, with the adoption of technologies leading to increased demand for advanced chipsets in automotive, medical and consumer electronics. Our target price implies a 25.5% upside to the last traded price.
Key Risks: Customer concentration, supply chain disruption, FX risk













(Non-SGX Report) UMS Holdings Limited: Growth Trajectory to Continue in 2021

Singapore

UMS Integration is a precision engineering group specializing in manufacturing high-precision front-end semiconductor components and providing electromechanical assembly and final testing services. The company's core business involves producing modular and integration systems for original semiconductor equipment manufacturers, also serving the aerospace, electronics, machine tools, and oil and gas industries. Headquartered in Singapore, it was incorporated on January 17, 2001.

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Singapore Technology Stocks Keep Pace with Big Global Peers

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