It wasn’t planned and intended. The idea just popped up in the head last night and I was quite convinced by its merit that I took action this morning.
UMS FY2022 Performance
UMS announced a stellar FY2022 with full year revenue up by 37% and net profit up by 77%. The strong showing can be attributed to higher Integrated System sales, delivery of water disinfection system and lower tax in Malaysia.
For this financial year, it will be a total of 5 cents, same as last financial year. The group has been pretty consistent with its dividend over the years, rewarding the shareholders when the company did well. Having said that, for the few challenging years they had, they did cut dividend which I think is reasonable.
*Above dividend by calendar year not financial year
Going forward the group guided a softer outlook for the next 6 months without providing any numbers. Based on the information provided, I am expecting a similar or slightly lower dividend next year.
So Why Switch?
One big risk faced by UMS and AEM is they are highly dependent of their key customers – Applied Material for UMS and Intel for AEM. Both have started to diversify their customer base with UMS going into aerospace segment and others (Kalf Engineer which I just found out develop a water disinfection system) and AEM pursuing other semiconductor firms to purchase their System Level Testing solution.
Of the two, I prefer AEM as it is an extension of their core business and if they execute it well, then their growth path is clear. On the other hand, UMS dwelling into different segments might help them to smoothen the cyclical drop in demand for semiconductor segment. However, this would probably take a longer time, given that semiconductor still accounts for about 86% of their revenue. Venture with its much larger customer base is definitely a more stable business to invest in for multi segments electronics manufacturer.
Market has reacted badly with the cautious guidance of $500 mil revenue by AEM. Its share price has plummeted by about 19% since the release of its FY022 results till now. On the other hand, UMS share price just dropped slightly after the release of its results.
Tidying up the above, these are my thoughts in short.
- I like AEM’s diversification and its growth story more.
- I think market has over-reacted to AEM’s weaker guided performance next year.
- I am unsure how market will react when UMS announced its weaker performance for 20231H.
- I have reached my limit for CPFIS for shares purchased.
I reckon that by switching from UMS to AEM at this moment will provide me with a better return going forward. Of course, I could be completely wrong but I am willing to take the action that appeals to me more.
Finally, about 20% of the sales proceed is allocated to more Venture shares as I am convinced that they will be able to sustain their dividend going forward.