"UMS’ capability to complete the majority of the manufacturing processes in-house such as plating, anodising, brazing, welding, chemical cleaning and so on have helped it maintain healthy margins and enable it to achieve prompt delivery to its customers," he adds.
Also, the company's Aug 1 dual listing in Bursa has drawn strong investor interest, and Cheong believes this can help close the valuation gap with its peers listed in Malaysia.
He points out that UMS is now trading at around 25% discount vs its Malaysian peers, at FY2026 PE of 18x vs 25x.
The company, according to Cheong, has flagged that its current dividend yield of 4%, paid quarterly, is more appealing compared with its Malaysian peers. As the majority of the institutional funds in Malaysia have a mandate of investing only in Bursa-listed stocks, UMS is able to tap a bigger pool of investors.
And of course, the global industry trend is supportive. According to industry association SEMI, global fab equipment spending for front-end facilities in 2025 is anticipated to increase by 2% y-o-y to US$110 billion, marking the sixth consecutive year of growth since 2020. Fab equipment spending is projected to rise by 18% in the following year to reach US$130 billion.
As an added positive, the global boom in air travel is seen to filter down into more business with UMS, which via its JEP Holdings unit is serving this industry.
"That said, the soon-to-be implemented sweeping US tariffs could dampen the industry's robust recovery and growth. Slower economic growth directly impacts demand for both passenger and freight air transport, and the resulting decline in discretionary air travel could hinder industry growth over time," warns Cheong.
See also: UOBKH raises Oiltek target price by 66% to 80 cents, proposes dual listing on Bursa
Nonetheless, Cheong is keeping his "buy" call but with a higher target price of $1.73, which is based on a higher PE-based valuation of 23x FY2026 earnings, up from 17.5x based.
Cheong's new valuation multiple is pegged to 2sd above UMS’ historical mean PE to reflect the valuation re-rating from the dual-listing exercise and better earnings quality from new contributions from its new customer.
UMS Integration shares changed hands at $1.46 as at 10.55 am, up 5.04%.
