Investing Opportunities in Singapore Semiconductor Companies: A Return to UMS Holdings

For the past few weeks, I took some time to digest the latest results of AEM Holdings (SGX: AWX) and Micro-Mechanics Holdings Ltd (SGX: 5DD).

Both have struggled in the past two years due to slowdown of semiconductor sector, with AEM being worse hit due to its reliance of its key customer Intel Corporation (NASDAQ: INTC).

Despite these current difficulties, there are signs of recovery for both companies.

While I considered increasing my holdings in both, I decided against it due to reaching my CPF Investment Scheme-Ordinary Account (CPFIS-OA) stocks limit. I also prefer to avoid investing in the same company using different funding sources.

Instead, I decided to explore other semiconductor counters in my watchlist.

UMS Holdings: A Renewed Interest

Given my previous investment in UMS Holdings (SGX: 55D), it’s unsurprising that I revisited the company.

At the time, I opted to switch from UMS to AEM and Venture Corporation (SGX: V03), attracted by their more promising prospects. However, it’s up for debate if I had made the correct decision.

Returning to UMS, I was impressed by the significant developments that had occurred since my previous investment. These are the notable ones that caught my attention.

• Applied Materials (NASDAQ: AMAT) now only sources about 50% of its needs from UMS. The other vendor that serves Applied Materials is Frencken Group (SGX: E28)
• It acquired a new customer – a Nasdaq listed semiconductor equipment manufacturer.
• The newly completed production facility at Penang, which is dedicated for the new customer, has started production.
• It successful placed 40 million shares, priced at $1.29.
• It just acquired another land parcel next to new factory in Penang for further expansion.
• It proposed a secondary listing in Main Market of Bursa Malaysia Securities Berhad
• It proposed a name change from UMS Holdings Limited to UMS Integration Limited

Although losing orders of Applied Materials to Frencken is a setback, I believe UMS has emerged from this transition in a stronger position.

Hence, I decided to add back a small stake in UMS in the past week at $1.02, which is just slightly lower than my divested price.

What about Frencken?

I did consider it, especially now that it has added Applied Materials as its customer. The other key customer being ASML Holding (NASDAQ: ASML).

However, unlike the other semiconductor companies mentioned earlier, Frencken has more diverse businesses, which includes automotive and life science segment.

While this provides resilience against cyclical changes in the semiconductor industry, it also limits its potential upside during the upcycle.

Coupled with my familiarity with UMS and its more attractive dividend yield, I chose to reinvest in UMS at this time. However, I continue to monitor Frencken and may consider adding it to my portfolio in the future.

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