Besides a lower valuation, UMS, giving a yield of 4%, is dishing out its dividends more frequently on a quarterly basis, which makes it more appealing to its peers.
"We also understand that the majority of the institutional funds in Malaysia have a mandate of investing only in Bursa-listed stocks.
"Moreover, UMS will engage the service of market makers at the initial phase to help enhance the liquidity of Malaysia-listed entity before more shares are being transferred from Singapore to Malaysia," adds Cheong.
The dual-listing aside, UMS is seeing healthy orders which gives it the confidence to maintain its revenue guidance of 10% growth q-o-q.
According to Cheong, a new customer for UMS is giving it a "strong order flow" as it diverts its US supply source to Asia.
In addition, the company's capability to complete the majority of the manufacturing processes in-house such as plating, anodizing, brazing, welding, chemical cleaning will help to maintain healthy margins and achieve prompt delivery.
"UMS has not seen any impact from the US trade tariffs as semiconductors are exempted from the tariffs. UMS has several measures in resolving its labour issues including training foreign workers and enhancing its staff retention strategy," adds Cheong.
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His target price of $1.32 is based on an unchanged PE-based valuation of 17.5x FY2026 earnings, which is pegged to 1SD above UMS’s historical mean PE to reflect the better production ramp-up from UMS’ new customer and improvement in its earnings quality from new contributions from its new customer.
For Cheong, catalysts that might help the share price move include higher-than-expected factory utilisation rates; return of orders for aircraft components to benefit its subsidiary JEP Holdings and better-than-expected cost management.
UMS Integration shares dropped 0.83% to trade at $1.20 as at 1.07 pm.
