The global semiconductor industry is showing signs of recovery as it continues to work through excess inventory built up during the industry’s recent cyclical slowdown. The first quarter of 2024 revealed improvements in global semiconductor sales, indicating that the worst may be behind us. This backdrop provides a promising environment to evaluate investment opportunities within the semiconductor sector in Singapore, focusing on three key players: Micro-Mechanics (Holdings) Ltd (SGX: 5DD), Venture Corporation Ltd (SGX: V03), and UMS Holdings Ltd (SGX: 558)
Micro-Mechanics (Holdings) Ltd
1. Financial Resilience: Micro-Mechanics reported a 12.8% increase in net profits to S$1.8 million in Q3 2024, despite a decline in revenue. The company’s robust financial health is evident with S$54.2 million in total assets and S$13.1 million in cash reserves, with no bank borrowings.
2. Geographic Diversification: The company has successfully navigated soft market conditions by capitalizing on geographic diversification, experiencing growth in China, Malaysia, and Taiwan despite declines in the USA and Singapore.
3. Innovation and Efficiency: Ongoing initiatives like the “Five-Star Factory” program aim to enhance operational efficiencies and innovation, positioning Micro-Mechanics favorably for when market conditions improve.
Venture Corporation
1. Recovery on the Horizon: Despite a challenging Q1 2024, where revenue fell by 19% year-on-year, Venture Corporation is optimistic about stronger performances in the subsequent quarters. This is supported by new customer onboarding in various technology domains and a strategic focus on operational efficiencies.
2. Strong Financial Position: Venture holds a significant net cash position of S$1.19 billion as of March 2024, providing stability and resilience.
3. Dividend Appeal: With a forecasted dividend yield of approximately 5.28% over FY24-26F, Venture offers an attractive return for investors during a recovery phase.
UMS Holdings Ltd.
1. Long-Term Growth Potential: Despite a downturn in FY24, with significant reductions in revenue and EPS forecasts, UMS Holdings is expected to return to growth in FY25. The new 300,000 sq ft factory in Penang has commenced production, potentially boosting future revenues.
2. Customer Relationships: UMS continues to strengthen its relationships with key semiconductor customers, which could lead to increased orders, especially with new engagements from its Penang facility.
3. High Dividend Yield: UMS Holdings offers a steady dividend yield of about 5.23% for FY24-26F, supporting investment appeal during recovery.
Conclusion
For investors looking at the Singapore semiconductor sector, Micro-Mechanics, Venture Corporation, and UMS Holdings represent strategic picks amid signs of industry recovery. Each company exhibits unique strengths such as financial stability, strategic customer relationships, and robust dividend yields, making them attractive for long-term investment. As the semiconductor industry begins to bounce back, these companies are well-positioned to capitalize on the upturn, though investors should remain aware of the risks associated with industry cyclicality and technological advancements.
Disclaimer: ProsperUs Head of Content & Investment Lead Billy Toh doesn’t own shares of the company mentioned.
