Testing the waters across Causeway

SINGAPORE semiconductor company UMS Integration Ltd’s impending secondary listing on the Main Market of Bursa Malaysia will be closely watched to see if it could lead to a rise in the value of its stock that currently trades on the Singapore Exchange (SGX).

UMS first announced this dual listing plan a year ago and indications are that the listing will take place soon.

Interestingly, industry sources say the shares being offered for sale to investors here amounts to only around 10 million existing shares.

“There does not seem to be any new shares being offered.

“It looks like this is a case of testing the waters,” says one fund manager.

It is understood that one of the driving reasons for the company to have this dual listing is for the stock to enjoy a higher value than what it currently gets on the SGX.

Officially, UMS has said the rationale for the dual listing is to “allow the group to broaden its investor reach and widen its investor base”.

It has also said the proposed secondary listing will potentially improve the liquidity of the company’s shares through separate trading platforms and enable it to tap into additional platforms for future fund raising besides providing it with the flexibility to access different equity markets to raise funds and support the group’s growth.

Currently, UMS which has production facilities in a few countries including Malaysia and the United States, is trading at about 16 times its estimated financial year ending Dec 31, 2026 (FY26) earnings.

In a recent note to clients, UOB Kay Hian (UOBKH)Research analyst John Cheong notes that UMS is trading at about a 30% discount compared to its Malaysian peers such as SAM Engineering & Equipment (M) Bhd and UWC Bhd which trade at 23 times their FY26 estimated earnings. He believes UMS’ valuation gap with the Malaysian companies will narrow, post-Bursa listing.

Former investment banker Ian Yoong who currently has a position in UMS says the secondary listing is expected to confer a higher valuation for UMS as similar companies listed on Bursa are trading at higher valuations. UMS also has attractive dividend yields.

UMS’s proposed secondary listing is intended to be undertaken by way of introduction and does not involve any offering of new shares.

Industry sources say that in this dual listing exercise, the 10 million or so existing shares held by current shareholders will be transferred across the Causeway from Singapore.

Notably, UMS has 710 million shares outstanding, which means 10 million shares comprise only a very small portion of the company’s shareholding.

It is left to be seen if the sale of such a small number of shares in the Malaysian market could actually lead to a rise in UMS’ SGX valuation.

That said, UMS shares on the SGX have risen 17% year-to-date, likely due to expectations of the dual listing.

Speeding up production

In its latest annual report, chairman and chief executive officer Andy Luong says the group’s two major global semiconductor customers have given positive outlook guidance for 2025, riding on the acceleration of artificial intelligent investment and demand worldwide.

“Our prospects remain bright as we speed up production ramp-up for our new customer in our new Penang facilities.

“The global air travel boom will also lift the performance of our aerospace business.”

With the company’s “strong fundamentals and financial position”, he says UMS is well-poised to capitalise on these upbeat trends to deliver positive returns.

In a June 12 report, UOBKH Research noted some key takeaways from having hosted UMS for a non-deal roadshow with institutional clients.

It said UMS is seeing healthy orders from its new customer and maintains its revenue guidance of 10% growth quarter-on-quarter in the second quarter of 2025, its dual listing on Bursa Malaysia is on track for completion in late-July 2025 and it hopes its valuation gap will narrow versus its Malaysia peers.

The research house has maintained its “buy” call on the stock with a target price of S$1.32 apiece. At last look, it was at S$1.23 apiece, valuing the entire company at S$874mil.

In FY24, UMS made a net profit of S$41mil, over 30% less than the S$60mil it made a year earlier. In its note, UOBKH Research tells clients that while UMS continues to see healthy orders from its new customer, the order from old customers also remains stable.

“UMS is encouraged by the strong order flow from its new key customer as it seeks to divert its US supply source to Asia.

“Also, UMS revealed that its capability to complete the majority of its manufacturing processes in house such as plating, anodising, brazing, welding and chemical cleaning have helped it to maintain healthy margins and enable it to achieve prompt delivery to customers.”

The research house adds that UMS has not seen any impact from the US trade tariffs as semiconductors are exempted from the tariffs.

On its proposed dual listing, it says it understands that most institutional funds in Malaysia have a mandate of investing only in Bursa-listed stocks.

“UMS will engage the services of market makers at the initial phase to help enhance the liquidity of the Malaysia-listed entity before more shares are being transferred from Singapore to Malaysia.”

Yoong reckons UMS will most likely trade at a premium of 5% to 10% to its share price on SGX when it is listed on Bursa.

“Arbitrage activity will most likely cap any irrational exuberance in its share price.”