UMS Integration and Peer Analysis: A Deep Dive into Market Dynamics

Broker: UOB Kay Hian | Date: Tuesday, 04 March 2025

Company Overview: UMS Integration

UMS Integration, trading under the ticker UMSH SP, is a specialist in providing high‐precision components, complex electromechanical assembly, and final testing services for semiconductor equipment manufacturers. The company is well‐positioned within the Information Technology sector and has seen its share price recently sit at S\$1.07. With an upgrade to a BUY recommendation and a new target price of S\$1.21 (+13.1% upside), UMS Integration is attracting renewed investor interest.

Founder Andy Luong holds a significant 15% stake in the company. The balance sheet looks solid with FY25 NAV per share at S\$0.61 and net cash per share at S\$0.12. UMS maintains a market capitalization of approximately S\$760.3 million (US\$563.6 million) and demonstrates active trading with a 3‐month average daily turnover of US\$1.4 million. The 52-week trading range shows a low of S\$0.965 and a high of S\$1.41, illustrating the current market dynamics.

Financial Performance and 2024 Results

The 2024 results show that UMS Integration reported earnings of S\$41 million, which, although representing a 32% decline year-over-year, met market expectations. The decline was primarily due to a weaker global chip demand, a trend impacting several segments. In the fourth quarter of 2024, earnings improved slightly by 6% quarter-on-quarter to S\$11 million, driven by a 4% rise in revenue and an offsetting S\$3 million gain from better forex movements—this helped counterbalance a reduction in gross margin from 53% to 47% due to unfavorable currency shifts.

Revenue for 2024 declined by 19% year-over-year, with semiconductor sales dropping 19%. A closer examination reveals that semiconductor integrated system sales fell sharply by 33% (to S\$94 million) while component sales declined moderately by 8% (to S\$110 million). Geographically, the performance was mixed; Malaysia registered an impressive 97% surge in revenue as new customer orders ramped up, while markets such as Singapore (down 23%), the US (down 6%), Taiwan (down 36%), and other regions faced revenue declines.

Outlook and Earnings Revisions for 2025

Looking ahead to 2025, UMS Integration is poised for a turnaround. Having commenced volume production for its new key customer, the company expects a significant improvement in delivery and order flow as production ramps up. The anticipated ramp‐up, coupled with several new product introductions from both existing and new customers, is forecasted to not only drive revenue growth but also enhance group net margins through reduced start-up costs.

In response to these favorable developments, UOB Kay Hian has raised their 2025 earnings estimate by 9% and their 2026 estimates by 14%. Concurrently, both the gross and net margin assumptions have been revised upward by approximately 2 and 1.5 percentage points respectively. This optimistic outlook is further bolstered by positive guidance from UMS’ key semiconductor customers, accelerated AI investments, and the global air travel boom that continues to benefit its aerospace business subsidiary, JEP Holdings.

Valuation and Key Financial Metrics

UMS Integration has experienced a robust revision in its valuation profile. The upgrade to a BUY recommendation comes with a new target price of S\$1.21, representing a 27% increase over the previous target. This valuation is anchored on a PE multiple of 17.6x applied to the 2025 EPS, which is notably 1 standard deviation above the company’s historical mean PE.

The comprehensive financial forecasts show a gradual improvement over the coming years. Key metrics include:

• Revenue growing from S\$242.1 million in 2024 to a projected S\$329.0 million in 2027.
• EBITDA rising from S\$65 million in 2024 to S\$101.1 million in 2027, with EBITDA margins improving from 27.0% to 30.7%.
• Net profit advancing from S\$40.9 million in 2024 to S\$63.5 million in 2027.
• An improvement in EPS, from 5.8 cents in 2024 to an expected 8.9 cents in 2027.
• Low leverage maintained through conservative debt levels, with net debt/(cash) to equity ratios gradually increasing in absolute value but still remain under close scrutiny.

Deep Dive into Peer Comparison

The report also provides an in-depth comparative analysis of UMS Integration alongside its key industry peers. This analysis highlights valuation multiples, profitability measures, and market performance metrics across a spectrum of companies in the semiconductor and technology space. The major players include:

AEM

AEM, trading at S\$1.33 with a market capitalization of S\$309 million, has a forecasted 2025 PE of 18.1x (dropping slightly to 16.5x in 2026). The company maintains a P/B ratio of 0.8 and an EV/EBITDA multiple of 9.1x, with an ROE yield of 4.6% and a dividend yield of 1.4%. These figures position AEM as a strong competitor in the sector with a balanced valuation profile.

Venture

Trading under ticker VMS SP at S\$12.53 and a market capitalization of S\$2,682 million, Venture exhibits a 2025 PE of 14.5x (marginally reducing to 13.7x in 2026). The company’s P/B ratio stands at 1.2, with an EV/EBITDA multiple of 8.0x. Additionally, Venture boasts a healthy ROE yield of 8.6% accompanied by a strong dividend yield of 6.0%, underscoring its attractive return potential to investors.

Frencken

Frencken, with a trading price of S\$1.07 and a market capitalization of S\$339 million, has lower valuation multiples compared to some of its peers. Its 2025 PE is 11.5x (dropping to 10.8x in 2026), and it maintains a P/B of 1.0. With an EV/EBITDA of 6.0x (reducing to 5.7x in 2026), and an ROE yield of 8.9% paired with a dividend yield of 2.6%, Frencken appears to be a competitively valued option in the market.

Singapore Average

The Singapore market average is presented with a 2025 PE of approximately 14.7x, a P/B ratio of 1.0, and an EV/EBITDA of 7.7x. The ROE yield for the regional average is 3.3%, reflecting a valuation benchmark against which UMS and its peers are measured.

Global Competitors

Several US-based companies are also benchmarked against UMS Integration:

• Kulicke & Soffa (KLIC): Trading at USD 38.27 with a market capitalization of S\$2,043 million, it exhibits a 2025 PE of 23.9x (16.9x in 2026), a P/B of 2.2 (2.1 in 2026), and an EV/EBITDA multiple of 15.3x (10.8x in 2026), with an ROE yield of 10.4% and a dividend yield of 2.1%.
• Applied Materials (AMAT): At USD 158.07 per share and a market capitalization of S\$128,423 million, this giant features a 2025 PE of 16.9x (15.6x in 2026), a P/B of 6.6 (5.7 in 2026), an EV/EBITDA of 13.9x (12.8 in 2026), and a robust ROE of 38.1% alongside a dividend yield of 1.0%.
• Lam Research (LRCX): With a trading price of USD 76.74 and a market capitalization of S\$98,508 million, Lam Research posts a 2025 PE of 20.4x (19.4x in 2026), a P/B of 10.1 (8.3 in 2026), and an EV/EBITDA multiple of 16.6x (16.2x in 2026). Its ROE stands at an impressive 52.8%, with a dividend yield of 1.2%.
• KLA Corp (KLAC): Trading at USD 708.84 with a market capitalization of S\$94,195 million, KLA Corp holds a 2025 PE of 22.4x (21.5x in 2026), a P/B ratio of 23.0 (19.7 in 2026), and an EV/EBITDA of 18.0x (17.3x in 2026). Its ROE yield reaches a striking 109.5%, complemented by a dividend yield of 0.9%.
• Teradyne (TER): At a trading price of USD 109.86 and a market capitalization of S\$17,766 million, Teradyne’s 2025 PE stands at 27.9x (20.2x in 2026) with a P/B ratio of 5.8 (5.1 in 2026) and an EV/EBITDA multiple of 20.2x (15.8x in 2026). Its ROE yield is 22.5%, and the dividend yield is 0.5%.

In direct comparison, UMS Integration is trading at S\$1.07 with a market capitalization of S\$564 million. It has a forecasted 2025 PE of 15.6x, a P/B ratio of 1.8, and an EV/EBITDA multiple of 8.6x. With an ROE yield of 11.5% and a dividend yield of 4.9%, UMS is positioned attractively in relation to its peers, reflecting both robust fundamentals and promising market growth prospects.

Detailed Financial Performance Overview

The report provides in-depth financial statements including Profit & Loss, Balance Sheet, and Cash Flow analyses covering the period from 2024 to 2027. Highlights include:

• Net Turnover: Increasing from S\$242.1 million in 2024 to a projected S\$329.0 million in 2027.
• EBITDA: Forecasted growth from S\$65.3 million in 2024 to S\$101.1 million by 2027, underpinning improved operational efficiency.
• Net Profit: A steady rise from S\$40.9 million in 2024 to S\$63.5 million in 2027.
• Margins: EBITDA margin is projected to improve from 27.0% to a consistent 30.7%, while net margins are expected to increase from 16.9% to 19.3%.
• Liquidity and Leverage: The balance sheet remains healthy with ending cash balances growing from S\$79.9 million in 2024 to S\$142.0 million in 2027, alongside conservative debt ratios.

These detailed financial metrics create a transparent view of UMS Integration’s operational efficiency and growth trajectory amidst the broader industry dynamics.

Industry Dynamics and Future Catalysts

The report emphasizes that the global semiconductor market reached an unprecedented annual sales record of over US\$600 billion in 2024, with expectations of double-digit growth in 2025. Strengthened by the acceleration of AI investments and the resurgence of global air travel—further bolstering the aerospace segment—UMS Integration is strategically positioned to capitalize on these trends.

Furthermore, UMS’ new key customer is anticipated to significantly enhance revenue and margin prospects, while global fab expansion projects (with 18 new fabs set to begin operations between 2026 and 2027) underscore the robust long-term industry outlook.

Conclusion and Investment Recommendation

UMS Integration’s upgrade to a BUY recommendation, set at a target price of S\$1.21, is driven by a confluence of factors: a promising ramp-up in volume production for a new key customer, favorable revisions in earnings and margin assumptions, and a supportive industry backdrop. The comprehensive peer analysis further establishes UMS as competitively valued relative to its regional and global peers.

With consistent financial performance improvements, strong cash flow dynamics, and a proactive growth strategy, UMS Integration stands out as a compelling investment opportunity in a market that is experiencing unprecedented growth in the semiconductor space.

Broker: UOB Kay Hian | Date: Tuesday, 04 March 2025