UMS

UMS: CIMB initiates Coverage with O/p Call and $0.60 TP. House note that Worldwide semiconductor manufacturing equipment spending is expected to grow at a 4.5% CAGR over 2013-16. The global semiconductor market is expected to bloom in the years ahead as major foundries raise their capex to support growing demand for personal mobile products such as tablets and smart phones. Expect UMS margins to improve in FY14 following the relocation of its Singapore manufacturing operations to Penang. Penang will allow the group to enjoy lower utility charges, cheaper labour and pioneer tax incentives. Free cash flows are expected to stay strong with no major capex planned. UMS remains in a net-cash position. Strong cash generation should allow the company to reward shareholders with quarterly dividends. House $0.60 target price, is based on 1.12x CY13 P/BV (high end of its last earnings upturn). Re-rating catalysts are expected from an upturn in the semiconductor market and the increasing consumption of mobile devices. Expect 5c DPS for FY13 and 4c each for FY14-15, implying yields of 8-10%.