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Not a very pleasant sight too..

7 January 2012:
J.P Morgan cut its rating on Applied Materials Inc. to Underweight from Neutral, while trimming estimates for KLA-Tencor, Lam Research and Nanometrics. In short, JPM is concerned about the outlook for semiconductor equipment spending. JPM wrote that it thinks a recent run-up in Applied provides an opportunity to sell (and short) the stock, as “the upcoming earnings season and associated 2013 capex guidance by major semi device makers will be negative for AMAT and the semi cap sector as a whole.” JPM sees “a modestly improved revenue outlook” in Q1 for equipment suppliers, largely based on timing of investments made by Taiwan Semiconductor and Intel.

But if dividend can sustain, might present an buying opportunity for the long-run.

another way to look at such cyclical companies is that they will be valued much higher when the environment is more favorable. So the important thing is that the company can survive til then to get better valuation. So far, UMS has been in a not-bad financial situation.

The dividends is just icing on the cake.

 This morning STATS upgraded its 4Q ’12 sales guidance from (US$416mln-441mln) to (US$475mln- 482mln), an upside of 9-14%. The mid-point of the new sales guidance (US$479mln) translates to 17% qoq and 12% yoy growth.
 As a result of the sales upgrade, EBITDA would come in at the higher end of previous guidance at 25-26% (versus 21-27%).
 Capex for the quarter would be US$55-60mln, up from US$40-50mln previously.
 Management said that the better than expected performance for the quarter is due to higher than expected demand from the communication market and stronger than expected ramp from the high end smart- phone and tablet markets.

The above was reported in Lim&Tan report last Fri. Will there be any impact to UMS?

When semicon sector down, the capex of equipment also down and thus affect Applied Material which in turn also impacted UMS.

I think UMS price is tie to Applied Material.

Applied Materials has issued weak sales guidance over the next few months. The bill to book ratio is still less than 1.0 so it is unlikely any recovery will occur soon. UMS derive over 90% of its revenue from Applied Materials so its small CEM division in the O&G and Aerospace division is unlikely to help cover this shortfall. UMS has historically generated positive cash-flow in each year of operation and currently has net cash gearing so it is unlikely to go bust. The key question - when will semiconductor equipment manufacturers orderbook recover ? Meanwhile, as long as UMS makes 3-4 mil profit per quarter, the 1 US cent dividend should be sustainable.

(Vested)

Actually I wonder have anyone done a correlation chart Qtr to Qtr earnings for 5 years between UMS and Applied Materials? I believe UMS revenue should be a leading (or maybe lagging indicator) instead of direct relation with share price (which is perceived by the market).

The share price of Applied Materials had rallied from about USD 10.00 to USD 11.80, up 18% in a space of two months between early Nov 2012 and early Jan 2013. JP Morgan believes that the share price has gone ahead of its valuation, therefore recommending calls to sell (or short) the shares.

Please note that during this period in which the share price of AM had increased 18%, the share price of UMS stayed almost flat or range bound between SGD 0.405 and SGD 0.425 – how correlated are the share prices between the two ? I would say lowly correlated over this short period. Therefore, I would not be surprised if the share price of AM drops back to USD 10.00 in the next two months and that of UMS remains flat or range bound within a narrow band.

That said, if one looks at the chart prepared by ray168, the share price of UMS seems to be correlated with that of AM in certain ways, over a longer time horizon.

With the cyclical nature of the semiconductor industry against the backdrop of uncertain macro environment, it would be more difficult to predict revenue accurately on a shorter term basis (q-o-q) than on a yearly basis, hence, there has been wide-ranging predictions on shorter term calls.

Nevertheless, on a yearly basis, views of both AM and JP Morgan are consistent – both hold the view that the semi-tools pie would shrink 15% - at most.

AM expects the semiconductor equipment investments to shrink between 5% to 15%, for 2013. .

Extract from AM’s guidance on 2013

“We now believe wafer fab equipment spending will end the year in the $30 billion to $32 billion range. Based on our expectations of a pullback in logic and foundry spending and continued weakness in memory, we see 2013 wafer fab equipment investment down 5% to 15% or falling in a range of $26 billion to $30 billion. We foresee consumer buying patterns and customer concentration again driving seasonality in the demand profile…………..”

http://seekingalpha.com/article/1012621-...ipt?page=1

JP Morgan believes overall semi capex will be down 10% to 15% in 2013.

http://www.forbes.com/sites/ericsavitz/2...eak-capex/

Let’s take a look at revenue of SSG – semiconductor division of AM

SSG : Revenue (USD million):
FY2009 = 1,960
FY2010 = 5,304
FY2011 = 5,415
1Q2012 = 1,344
2Q2012 = 1,777
3Q2012 = 1,545
4Q2012 = 870 (This is 44% lower compared to 3Q2012) – the worst Q in 2012.）
FY2012 = 5,536 (This is 2% higher than FY2011) – a record year of the past four years.

Assuming SSG could maintain its percentage % of market share, a 15% down sized revenue for 2013 would still amounts to USD 4,705 million – which is not bad at all IMO.

What if FY2013 = 4 x 4Q2012 = USD 3,480 million ? Still better than FY2009, isn't it? This would not be the end of the world for UMS cos it survived 2009. Ha-Ha !

(Vested)

The edge article this week shows a good spread of e various components that makes up a tablet

Does ums has contract from apple??

(09-01-2013, 12:18 AM)Boon Wrote: [ -> ]The share price of Applied Materials had rallied from about USD 10.00 to USD 11.80, up 18% in a space of two months between early Nov 2012 and early Jan 2013. JP Morgan believes that the share price has gone ahead of its valuation, therefore recommending calls to sell (or short) the shares.

Please note that during this period in which the share price of AM had increased 18%, the share price of UMS stayed almost flat or range bound between SGD 0.405 and SGD 0.425 – how correlated are the share prices between the two ? I would say lowly correlated over this short period. Therefore, I would not be surprised if the share price of AM drops back to USD 10.00 in the next two months and that of UMS remains flat or range bound within a narrow band.

That said, if one looks at the chart prepared by ray168, the share price of UMS seems to be correlated with that of AM in certain ways, over a longer time horizon.

With the cyclical nature of the semiconductor industry against the backdrop of uncertain macro environment, it would be more difficult to predict revenue accurately on a shorter term basis (q-o-q) than on a yearly basis, hence, there has been wide-ranging predictions on shorter term calls.

Nevertheless, on a yearly basis, views of both AM and JP Morgan are consistent – both hold the view that the semi-tools pie would shrink 15% - at most.

AM expects the semiconductor equipment investments to shrink between 5% to 15%, for 2013. .

Extract from AM’s guidance on 2013

“We now believe wafer fab equipment spending will end the year in the $30 billion to $32 billion range. Based on our expectations of a pullback in logic and foundry spending and continued weakness in memory, we see 2013 wafer fab equipment investment down 5% to 15% or falling in a range of $26 billion to $30 billion. We foresee consumer buying patterns and customer concentration again driving seasonality in the demand profile…………..”

http://seekingalpha.com/article/1012621-...ipt?page=1

JP Morgan believes overall semi capex will be down 10% to 15% in 2013.

http://www.forbes.com/sites/ericsavitz/2...eak-capex/

Let’s take a look at revenue of SSG – semiconductor division of AM

SSG : Revenue (USD million):
FY2009 = 1,960
FY2010 = 5,304
FY2011 = 5,415
1Q2012 = 1,344
2Q2012 = 1,777
3Q2012 = 1,545
4Q2012 = 870 (This is 44% lower compared to 3Q2012) – the worst Q in 2012.）
FY2012 = 5,536 (This is 2% higher than FY2011) – a record year of the past four years.

Assuming SSG could maintain its percentage % of market share, a 15% down sized revenue for 2013 would still amounts to USD 4,705 million – which is not bad at all IMO.

What if FY2013 = 4 x 4Q2012 = USD 3,480 million ? Still better than FY2009, isn't it? This would not be the end of the world for UMS cos it survived 2009. Ha-Ha !

(Vested)

(14-01-2013, 11:26 PM)2V. Wrote: [ -> ]Does ums has contract from apple??

UMS has been providing front-end high precision components/services to original semiconductor equipment manufacturers. Currently, UMS is qualified for more than 70 special processes in the production of components for semiconductor equipment manufacturers.

UMS’s major client is Applied Materials – an original semiconductor equipment manufacturer.

Applied Materials major clients include Intel (IDM), Samsung (IDM) and TSMC (foundry) - chips manufacturer.

See UMS’s industry positioning - attached.