UMS

UMS: CIMB’s take on whether “smart money is asking us to sell”. On 5 Jun, when shares started trading on an ex-bonus basis, major shareholders Andy Luong and Applied Materials (AMAT) sold down shares to 21.99% and 4.83% respectively. CIMB thinks Mr Luong’s sale isn’t a surprise given his record of selling shares in the company. What may be more unsettling is AMAT’s cessation as a substantial shareholder. CIMB is unaware if AMAT is selling shares purely for share rebalancing after UMS’ bonus issue. CIMB highlights 2 concerns: 1) Some may fret that a profitable contract with AMAT may not be renewed/ less favourable renewal terms post 2017. 2) Board may choose different path in managing excess cash, given Mr Luong’s smaller stake. Citing a possible earnings downturn, CIMB cuts P/B target to 1.19x and cut DPS to 5¢ from 6.5¢/7¢, and downgrades UMS to Reduce from Hold with TP of $0.56 (previously $0.80)