UMS Holdings

UMS Holdings: 3Q14 net profit improved 14% y/y to $5.5m, although revenue slipped 2% to $24.8m, resulting from a 82% drop in the contract equipment manufacturing segment ($0.1m), but core semiconductor business held steady at $24.6m. Gross margin improved marginally to 54% (+1 ppt), on higher semiconductor component sales. The bottom line was boosted by lower raw material purchases and subcontractor charges (-3%), decreased taxes (-47%), and a $0.5m FX gain from the USD appreciation. This brought 9M14 earnings to $21.3m (19%) and revenue to $87.8m (2%), making up 74% and 73% of estimates by the only one coverage on the street. Operating cash flow generation ability for the front-end semiconductor equipment manufacturer remains strong with $6.9m in 3Q14, bringing year-to-date operating cash flow to $25.4m, 20% higher compared to 9M13. Subsequently, management maintained an interim DPS of 1¢. Management guided for a relatively subdued 4Q14, resulting from several delivery push backs by clients. As such, group expects a flat sequential performance. At $0.51, UMS is valued at 7.6x forward P/E and 1.1x P/B, supported by its net cash position of $32.9m ($0.077/share).