MAYBANK Securities has upgraded UMS Holdings : 558 0% to “buy” from “hold” on higher chances of an order rebound in the next financial year.

The upgrade came with a raised price target of S$1.44 from S$1.16, based on a higher multiple of 11 times the brokerage’s estimates for FY2024 earnings than the previous nine times.

Maybank analyst Jarick Seet said in a report on Monday (Sep 25) that the main reason for UMS’ sombre financial performance in the current financial year is fewer orders.

However, the semiconductor company should benefit from an industry recovery next year as it experiences a potential order rebound.

Seet expects UMS to register an increase in components orders in FY2024 as its key customer AMAT raised the revenue and profit guidance for the fourth quarter this year.

“UMS should benefit as AMAT’s inventory levels should be depleted at a faster rate,” he added.

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“UMS also renewed its integrated system contract with its key customer until the end of 2025 and received an in-principle agreement with a new customer for a three-year contract with a renewal option.”

The brokerage believes the new customer is LAM Research, one of the three largest semiconductor equipment makers in the US.

This would, conservatively, translate to an additional S$30 million contribution in the next financial year and S$300 million topline contributions per annum in the next three to five years.

“If all goes well, FY2024 could potentially be a good year for UMS.”

Seet also highlighted that the semiconductor company raised dividends by 20 per cent for the second quarter, signalling a secured future for shareholders. He thus expects a 4.5 per cent yield for FY2024.

While UMS saw weaker demand from its backend semiconductor customers in the first half, Seet noted that the second half could remain equally weak as its key customer is unlikely to ramp up orders this year.

Shares of UMS were up 1.6 per cent or S$0.02 at S$1.27 as at 4.29 pm on Tuesday.