She attributes this to UMS’s significant production ramp-up and new product introductions (NPI) for a new customer and stable performance from key existing customers which includes contributions from its new Tampines plant.
Other factors include the positive guidance provided by its two largest global semiconductor customers, the robust semiconductor market, which technology research firm, Gartner projects to grow by 15.7% in 2025 to US$758.7 billion ($972.3 billion) and 15.0% in 2026, as well as the group being a second-order artificial intelligence (AI) beneficiary.
In Penang, Malaysia, UMS has expanded its production capacity with a new plant, which began mass production last year. The group has also purchased a plot of land next to its existing facility last year, for future expansion.
On this, Ling writes in her July 24 report: “With its main facilities located in Malaysia, UMS stands to benefit from the ongoing shift in global supply chains amid China-US trade tensions. The group is well-positioned to capture new growth opportunities as more companies diversify operations out of China and the US.”
Despite rising geopolitical risks and tariffs, UMS has not experienced any direct operational impact. This is due to its “local-for-local” model, shipping mainly to customer operations in Malaysia and Singapore.
“For direct shipments to the US, which accounted for around 13% of 1QFY2025 revenue, tariffs are borne by the customers,” adds Ling.
With this, her raised target price is based on 25 times blended FY2025/FY2026 earnings, above two standard deviations (s.d.) and “close to the previous peak” in early 2024.
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She adds that UMS is a direct beneficiary of the Monetary Authority of Singapore’s (MAS) equity market development programme (EQDP).
“Historically, around 80% of UMS’s revenue on average has been attributed to Applied Materials (AMAT). Disruptions to the relationship or weakness in AMAT’s end-demand could significantly weigh on UMS’s performance,” writes Ling.
As at 12.08pm, shares in UMS are trading one cent lower or 0.66% down at $1.51.
