UMS Holdings Ltd

Today i completed my buy order for the technology-related stock i mentioned on 31 Aug 2012.

I have bought 10 lots of UMS Holdings Ltd at $0.40. If you have been following my blogs for a while, you will know my dislike for technology and manufacturing stocks since a long time ago and my views of them have not changed.To make me buy this stock, it must have certain "virtues" which i like.

Let's have a brief description of what UMS Holdings Ltd does and why i found it to be attractive.

Business activities

UMS Holdings Ltd (the "Company" or "UMS") is a one stop company providing equipment manufacturing and engineering services to OEMs of semiconductors and related products. (Urghh...can you still remember the pain brought upon investors from Chartered Semiconductor and STATS Chipac?)

Research Report

I attach the research report of UMS Holdings Limited, which was issued by SIAS on 22 May 12 for your bedtime reading. The recommendation is presented below with its target price.

What i like about the Company

There are a few things which i like about the Company.

1. The Company has no long term debt.

Based on the 30 June 2012 results, the Company has a cash of $23m and no long term debt. It has a short term borrowing of $10m which was used for an acquisition. In the prior quarter, the company is in a net cash position with no debt.

2. The Company has adopted a quarterly dividend payment policy.

I think the Company is showing good capital management and accountability by adopting such a policy. It gives great certainty to investors of a regular payment stream. The only concern is that i am not sure about the capex requirements of UMS in the coming years. Probably it will set aside a certain amount each quarter for capital expenditures. In fact, the Company has announced an interim dividend of 1c per share and the share will trade X-dividend on 16 Oct 2012.

3. The quarterly results for Q2 2012 continue to improve over the same period last year.

4. The Company is trading at attractive valuations.

In my view, i thought the Company is currently trading at attractive valuations of only 5.2x price-earnings ratio and at 0.7x price to book. I believe the good valuations is probably due to its small cap status of only $137m

5. The addition of UMS will further diversify my portfolio

My portfolio currently has no technology stocks unless you include Nera Telecommunications. I have no intention to add any more tech-related counters to my SRS portfolio unless they are very compelling. I think $4,000 exposure to this segment should be sufficient.

That is it for today. This is not an inducement for you to buy but for me to keep a record and rationale so that i can refer to it in future.

Happy SRSing.