UMS

Up 6% at $0.325. With upbeat outlook from TSMC and UMC at their AMGs, the Street expects TSMC and UMC to announce plans to upwardly adjust their capex budgets for 2010 at their upcoming investors conferences on July 29 and Aug 4, respectively. The expectation is TSMC may revise its 2010 capex to US$5.2-5.3 billion, up 8-10% from an original goal of US$4.8 billion. UMC may raise its full-year budget by at least 20% from US$1.2-1.5 billion to US$1.8-2 billion…

Goldman Sachs cites that they also expect that TSMC is likely to further increase capex in 2010 as the company attempts to pull in its capacity expansion scheduled for 2011 into 2010. Capex upside would fuel more growth momentum for semicon equipment vendors such as Applied Material(AMAT), which contributes more than 50% of UMS’s total revenue and hold 5.24% shares of UMS ownership…

AMAT’s rev leads UMS 1Q ahead with 94.11% correlation, and AMAT’ 1Q rev reached new high since 3Q07 and swung to a profit. UMS’ rev will keep growing at least in the coming quarters on the back of sustainable semicon recovery and revenue transmission effects. Currently, only CIMB covers UMS, and it calls to buy with TP of $0.33 based on its latest report in Jan. As of 1QFY10, UMS’s NAV is $47.37 cents. UMS is trading at 6x FY10PE discount to industry average of 12.64x and AMAT’s 14.93x