Friday, March 28, 2014

UMS Bonus Issue Proposal

UMS Holdings has just announced proposal for a 1-for-4 bonus issue. Based on the announcement, the rationale for the bonus issue is "to increase the issued share capital base of the company to reflect the growth and expansion of the Group's business".

My opinion for the growth prospect for UMS lies on its strong relationship with its key customer Applied Material (AMAT). The recent merger between Applied Materials and Tokyo Electron (a major Japanese chip equipment maker) has improved AMAT's competitive position in semiconductor equipment. While acknowledging the risk of UMS's dependence on AMAT, the prospect of continued business with AMAT is high in my opinion due to the expertise and working experience with UMS.

If the proposed bonus issue goes through, it will bring down my average entry price for UMS from $0.4575 to $0.366!

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