With this, Seet has kept his “buy” call on UMS at a higher target price (TP) of $1.59 from $1.19 previously.
He writes: “We also expect upcoming 1H2025 results to improve as revenue from its existing customers should grow slightly y-o-y.”
In the 1QFY2025 ended March, Malaysia revenue surged 287% y-o-y to $9.4 million from $2.4 million in the same period a year before, largely due to the production ramp up of semiconductor components for the new major customer.
Come the end of FY2025, UMS’s management expects to hit a revenue of $1.5 million weekly, notes Seet.
He writes: “It is currently at a $600,000 to $650,000 a week run rate. In addition, orders from its existing customer should increase slightly for FY2025. All in all, we expect revenue to improve q-o-q from 2QFY2025 onwards.”
Overall, the analyst sees that earnings have “likely bottomed” in the FY2024 and “should improve” in the years ahead, with profitability improving q-o-q as UMS’s new major customer commences production.
For the first quarter, management declared a dividend of one cent a share.
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Upsides noted by Seet include stronger-than-expected revenue momentum following capacity expansion in the FY2022, better-than-expected contributions from subsidiaries Kalf Engineering, Starke and JEP, as well as better-than-expected costs control, which in turn supports margins.
Conversely, downsides include higher-than-expected labour costs, difficulties expanding workforce, lower-than-expected margins and finally, lower-than-expected dividends which may “spook” yield investors.
As at 1.43pm, shares in UMS are trading one cent higher or 0.69% up at $1.47.
