UMS

UMS: Sias maintains Increase Exposure Call with $0.79 TP. Note that share price traded ‘ex-div’ today and shareholders can look forward to a handsome yield of 10.5%, based on the 23 Nov close of $0.380.

While still maintaining its div payout, UMS has been building up cash reserves to leverage on possible M&A opportunities for growth. Given the 60% sequential increase in cash to $35.96m at the end of 3Q 2011, UMS looks well positioned to bring back some growth. With a huge Warchest, UMS ended the qtr with cash, net of leases, of $32.4m, which is equivalent to 9.43c / share. Net cash now accounts for 24.8% of UMS’s market value. As UMS has no bank borrowings except for $3.56m of finance leases, Co. can lever its balance sheet to make acquisitions of decent size.

UMS also intends to shift more activities to its lower cost Penang facility to further streamline its cost structure. Cost savings will be further boosted by the Penang facility’s pioneer tax status obtained in 3Q FY11. The tax status will last for at least five yrs, reflecting a structural change in the Co’s tax regime.