UMS

UMS Holdings Limited is a one-stop strategic integration partner providing equipment manufacturing and engineering services to Original Equipment Manufacturers of semiconductors and related products. The products it offers include modular and integration system for original semiconductor equipment manufacturing. Headquartered in Singapore, the Group has production facilities in Singapore, Malaysia as well as California and Texas, USA. It is well known that UMS’ key customer is Applied Materials, which accounts for about 80% of its revenue.

UMS has consistently generated very strong free cash flow (FCF) and is very generous with dividend payout.  It releases its FY 2015 results this evening and it is a very impressive set of results.

Revenue for FY 2015 is about 1% higher than that of FY2014 and yet profit before income tax increased by 33%, and net profit increased by 38% compared to FY 2014.

Cash and bank balances increased from $33.8m on 31 December 2014 to $38.9m on 31 December 2015. On the other hand, total liabilities reduced from S$15.2m on 31 December 2014 to $13.2m on 31 December 2015. Free cash flow is again very strong, standing at $31.2m for FY 2015, which is significantly higher than the net profit of $24.9m for the year.

Like in 2014, the management declared 2 cents of final dividend and 1 cent of special dividend. Together with 3 cents of interim dividend (1 cent per 1Q, 2Q and 3Q), total dividend for the year is 6 cents.  At the last transacted price of 53.0 cents, the dividend yield is 11.3%.

Other financial ratios for this counter are as follow:
PER - 6.63
P/NAV - 1.17
ROE - 17.63%
Dividend yield - 11.3%
Price/Net-net current asset - 3.01

I am a very happy shareholder of UMS. The average cost of my UMS shares is about 50.5 cents and I have already collected a fair bit of dividend.  I am mindful that one of the key risks with investing in UMS is its over dependence on Applied Materials and I shall re-assess this risk regularly.