Broker's take: CGS-CIMB upgrades UMS to 'add', raises target price to S$1.08
CGS-CIMB has upgraded UMS Holdings to "add" and raised its target price to S$1.08 from S$0.96, after revising revenue forecasts upwards for the precision engineering firm.
Shares in UMS were up 0.5 Singapore cent or 0.5 per cent to S$0.97 at 10.35am on Wednesday.
On Monday, UMS posted a 4 per cent dip in Q4 net profit to S$9.2 million due mainly to foreign exchange loss, an impairment of goodwill relating to a subsidiary and provisions for inventory obsolescence.
Revenue for the three months ended Dec 31, 2019, leapt 56 per cent to S$40.4 million, driven primarily by semiconductor sales.
In a Tuesday report, CGS-CIMB analyst William Tng is expecting a stronger earnings recovery for FY2020 after an improved Q4 semiconductor sales performance.
As a result, CGS-CIMB's FY2020-FY2021 revenue forecasts for UMS have been raised by 9-11 per cent to take into account the recovery in the semiconductor industry.
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Key risks to the sector rebounding include a lack of progress in the resolution of Sino-US trade issues, and disruption to the global supply chain due to the coronavirus (Covid-19) outbreak, Mr Tng said.
On the other hand, a stronger-than-expected recovery for the semiconductor industry could prompt the research house to make a positive rerating.
Following UMS's results release, Maybank Kim Eng on Tuesday maintained its "buy" recommendation and target price of S$1.13 for the stock.
Meanwhile, DBS Group Research lowered its price target for UMS on Wednesday to S$1.12 from S$1.16 due to lower margin assumptions, but maintained the "buy" call.
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