UMS Holdings

[ethys]

UMS Signs MOU with Malaysian Aerospace Metallic Component Manufacturer

Highlights

- Under the terms of the MOU, UMS will invest RM0.1 million into All Star Fortress Sdn. Bhd. (“ASF”) via new shares subscription for 10% equity of ASF’s enlarged shareholdings
- UMS will also extend to ASF secured convertible loans up to a total of USD7.5 million, which includes USD6.7 million for ASF to strengthen its capability and expand its manufacturing capacity to meet the long term needs of aerospace customers
- ASF to relocate its manufacturing operations to UMS’ Penang premises, allowing the Group to better utilized its facility space
- Aerospace industry has significant growth potential as increasing air traffic continues to drive up demand for new airplanes, and large order backlogs by major aircraft makers have also resulted in pent-up demand among components suppliers

http://infopub.sgx.com/FileOpen/UMS_Pres...eID=381892

(Not Vested)

This is an excellent news. It will allow UMS to better use their facility in Penang hence maximizing shareholders returns. It will also give them a potential to diversify tho this is still hypothetical at this stage plus this is not the first time they are trying to diversify... Nonetheless their approach seems more cautious and reasonable this time as regardless of new clients for UMS or not, ASF is an existing company with existing clients so their current activity should indeed sustain the use of UMS facilities in Penang.
On the downside UMS will loan 7.5M USD to ASF so that should lower expectations of a higher special dividend next year tho the amount is not that huge for UMS thus they should still be able to pay a 2c special dividends next year.

Nick, I remember that one of the reasons why you divested UMS is that AMAT sold some of their UMS shares. So I guess you were worried that AMAT collaboration with UMS could negatively evolve? Now that UMS is starting to diversify while AMAT is still doing business as usual with UMS, will you consider buying again some UMS shares?

I agree that we will only know in 2017 whether AMAT will renew their contract or not with UMS but there is no insight as of now that this will happen. Meanwhile I find this announcement to be a step in the right direction tho this will take a while before we can see if this is working or not.

<vested>

[Boon]

Under the terms of the MOU, UMS is to perform the following:
(i)  preliminary cash injection of RM0.13 million via new shares subscription for a 10% equity share of ASF.
(ii)  extend secured convertible loans in total of USD7.5 million to ASF. The breakdown of usage of loans is as follows:
a) USD0.85 million for ASF's working capital needs
b) USD6.65 million for ASF to expand its manufacturing capacities
(iii)  to provide its Penang premises for ASF’s manufacturing operations via a tenancy agreement upon terms and conditions to be mutually agreed
 
Wondering:
1)  what is the interest rate for the loan?
2)  What is the tenure of the loan?
3)  What is the timeline for conversion?
4)  how much equity stake in ASF would the USD 7.5 million be entitled to be converted into ? What would be UMS’s ultimate equity stake in ASF ?
 
No doubt, it is only at MOU stage at the moment, with a lot of details yet to be worked out, nevertheless, I view this new venture positively as it would :
-      allow UMS to achieve diversification beyond the semiconductor segment.
-      allow UMS to achieve an alternative revenue contribution from the aerospace industry.
-      enable UMS to better manage its machinery, equipment as well as its factory space.

Interestingly, UMS is being listed as a customer of ASF in the semiconductor industry on its website.
http://allstarfortress.com/v1/index.php/customers
 
Only 2 customers in the aerospace industry are being listed on ASF’s website, namely ACM and CTRM.
ACM is a Joint Venture (JV) Company based in Bukit Kayu Hitam, Kedah, Malaysia, owned equally by The Boeing Company and Hexcel Corporation.
http://www.acmsb.com.my
 
Composites Technology Research Malaysia Sdn Bhd (CTRM) was incorporated on 20 November 1990 with Ministry of Finance Incorporated as its principle shareholder. CTRM is entrusted with a strategic role to develop high technology based industry, namely the aerospace and composites industries.
http://www.ctrm.com.my/ahist.php
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[Boon]

As at 3Q2015 (30-Sept-2015), UMS has SGD 38.255 million in cash with no bank borrowing.
 
As of this date, only the first interim dividend of 1 cent for 1Q2015 had been paid out.
 
Second and third interim dividend of 1 cent each (= SGD 8.6 million) would have been paid out before year-end.
 
Investment in ASF costs roughly SGD 11 m and assumed it would be loaded upfront.
 
Net cash at end of FY2015 = 38.255 – 11.0 – 8.6 + FCF generated in 4Q2015
 
= SGD 18.655 million + FCF generated in 4Q2015 = more than enough to cover a final DPS of 3 cents (=SGD 12.9 million.)
 
In short, UMS does seem to have enough cash to pay for its new investment in ASF upfront and also to maintain a DPS of 6 cents for FY2015, if the management decides to do so.  
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[Boon]

Internet of Things Spending Forecast to Reach Nearly $1.3 Trillion in 2019 Led by Widespread Initiatives and Outlays Across Asia/Pacific 
10 Dec 2015 , By IDC
https://www.idc.com/getdoc.jsp?containerId=prUS40782915
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Cellphones Remain the Largest Driver of IC Sales, but Growth Stalls
Market for Internet of Things expected to be high-flyer through 2019. 
10 Dec 2015, By IC Insights
http://www.icinsights.com/data/articles/...ts/845.pdf
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[Boon]

Interesting..........
The major aerospace hub of Malaysia is in Subang. 
ASF is currently in Melaka.
UMS is in Penang.
ACM (a client of ASF) is in Kedah.
ACM would be better served from Penang than from Melaka.
________________________________________________________________
Aerospace Globalization
THE NEXT WAVE
Presented by:
Dennis Ling
Head, Singapore Office, ICF SH&E
dennis.ling@icfi.com
28 April 2014 

https://www.singaporeairshow.com/downloa...l_2014.pdf

Key Messages
§ The nature of aerospace globalization is changing as OEMs experiment with new ways to manage and integrate their value chains across widely dispersed global geographies
§ The pace of globalization accelerated in recent years
§ Several countries are emerging as new aerospace clusters including Malaysia, Mexico, Brazil, UAE, and Morocco
§ The changing nature of aerospace globalization creates opportunities and challenges for OEMs...and governments
§ Despite the increased pace of globalization, the aerospace industry is inherently political and is not “flat”, but globalization will continue in the long term 
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See page 33 which shows the aerospace clusters in Malaysia:
Malaysia has also attracted numerous investments 
- Subang is currently the hub for MRO activities in Malaysia; MAE’s main facility is at Subang – so co-location makes sense; Development of KLIA as an MRO hub has implications for Subang
- Subang is also a key hub for business aviation & rotary wing
- Penang is a major electronics manufacturing hub in the region; Kedah and Melaka has seen some success in composites  manufacturing
- Malaysia has comparative advantages in availability of land, good infrastructure and lower labour costs 
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[valuebuddies]

It seems to be a good sign that UMS is moving away from being too attached with AMAT, but it can be also read as a alarming sign as the contracts with AMAT is expiring after a year.

[Boon]

STUDY ON THE AEROSPACE INDUSTRY IN PENANG
Feb 2014
http://www.investpenang.gov.my/files/inv...981186.pdf

Malaysia has a good position in the centre of ASEAN and with already well-established aerospace cluster. Some key aerospace manufacturing projects are located in Penang. Developments in this context are often related to the state of Penang with its excellent location with respect to the Indonesia, Malaysia, and Thailand – Golden Triangle (IMT-GT), infrastructure and facilities. Penang International Airport has good connections with major cities in Southeast Asia. Majority of companies chose to be located around in Selangor (50%) or Kuala Lumpur (28%), and balance in Penang (17%) and others (5%).............................
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Interestingly, Singapore Aerospace Manufactuting (SAM) has been investing and seems to be doing pretty well in Malaysia – both of its manufacturing plants are located in Penang as well - owned through its subsidairies “AVIATRON” and “SAM Engineering and Equipment”.

SAM to expand aerospace business here
http://penangcatcentre.my/whats-up-details.yqi.aspx

SAM's Penang subsidiary to supply beams to both Airbus and Boeing craft
First Published: 5:57pm, Feb 13, 2014
http://www.fz.com/content/sams-penang-su...z3uS0QRdNy
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[Boon]

Semiconductor Equipment Sales Forecast: $37 Billion in 2015 and $38 Billion in 2016
15-Dec-2015, by SEMI
http://www.semi.org/en/node/60181?id=highlights
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Gartner Says By 2018, 50 Percent of Consumers in Mature Markets Will Use Smartphones or Wearables for Mobile Payments
Customers Behaviors Are Evolving Alongside Ever-Changing Technology
15-Dec-2015
http://www.gartner.com/newsroom/id/3178217
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Loads of excitement predicted for 2016
http://evertiq.com/design/38296
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[Boon]

It is trending downwards..................
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North American Semiconductor Equipment Industry Posts November 2015 Book-to-Bill Ratio of 0.96

SAN JOSE, Calif. — December 17, 2015 — North America-based manufacturers of semiconductor equipment posted $1.24 billion in orders worldwide in November 2015 (three-month average basis) and a book-to-bill ratio of 0.96, according to the November EMDS Book-to-Bill Report published today by SEMI.  A book-to-bill of 0.96 means that $96 worth of orders were received for every $100 of product billed for the month.

SEMI reports that the three-month average of worldwide bookings in November 2015 was $1.24 billion. The bookings figure is 6.7 percent lower than the final October 2015 level of $1.33 billion, and is 1.7 percent higher than the November 2014 order level of $1.22 billion.

The three-month average of worldwide billings in November 2015 was $1.29 billion. The billings figure is 5.2 percent lower than the final October 2015 level of $1.36 billion, and is 8.3 percent higher than the November 2014 billings level of $1.19 billion.

"The semiconductor equipment book-to-bill ratio continued to decelerate in the fourth quarter," said Denny McGuirk, president and CEO of SEMI.  “In light of this recent softening and with the currently strong U.S. dollar, SEMI anticipates that the total equipment market (billings) will be flat to slightly down this year vs. last year as reported in U.S. dollars.".................................................................

http://www.semi.org/en/node/60226?id=highlights
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[ozone]

Very Interesting Postings indeed !!! UMS was recommended by my Dealer because of the Low Price and for their recent Dividends ! So it was Good that I managed to secure both Dividends and also managed to sell with a slight profit ! So in the coming weeks I will be tracking the prices and hope to buy low again !