UMS Holdings shares are down after it reported lower and lower-than-expected earnings for its 1QFY2024, no thanks to softer demand within the semiconductor space.
For the three months ended March, UMS reported earnings of $9.8 million, down 44% y-o-y. Revenue in the same period was done by a third to $54 million, largely from a 37% drop in its semiconductor segment.
In a sign of its confidence in its balance sheet, UMS plans to pay a higher interim dividend of 1.2 cents for the quarter, up from 1 cent paid for the year-earlier period
Andy Luong, chairman and CEO, maintains that the 1QFY2024 results are consistent with the company's guidance.
Despite the lower numbers, DBS Group Research, in its May 10 note, has maintained a "buy" call and $1.84 target price on the stock.
UMS's new plant in Penang has commenced volume production in March for a new customer and an uptick in order flow can be expected in the coming months.
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"This new plant well positioned the group to capture new growth opportunities when the global semiconductor demand rebounds," says DBS.
On the other hand, Jarick Seet of Maybank Securities downgraded the stock to "sell" from "hold", along with a slashed target price of 88 cents, from $1.41.
In his May 13 note, Seet points out that UMS's earnings are likely to remain weak and that it is losing market share with an existing customer.
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"While we expected a weak 1QFY2024, we did not expect the outlook to be gloomy and our view of UMS losing market share with its key customer was also validated," says Seet.
According to Seet, UMS is still expecting a US$30 million revenue contribution from its new customer this current FY2024 and he sees potentially further upside within this year if the semiconductor industry picks up in the second half of the year.
UMS shares closed at $1.11, down 15.9% for the day.
