Semiconductor Plays Amongst Singapore’s Most Traded in 2020 YTD

The global semiconductor sector is one of the world’s most competitive industries driven by a race for international market share and strong supply chain management, innovation and a fast evolving field of product application. While global semiconductor stocks appear to have booked a steady median 6% gain in the 2020 year to date, there has been a performance divide between the larger capitalised stocks and the less capitalised stocks.

The top quartile of the global semiconductor stocks by market value have generated a median 20% total return in the 2020 year to 8 July, whilst the remainder of the global semiconductor stocks posted a median 2% total return. A similar performance divide was observed in 2019, underlying the competitiveness of the industry.

On 3 July, the Semiconductor Industry Association highlighted that “the global semiconductor market in May remained largely resistant to the widespread economic disruptions caused by the COVID-19 pandemic, but there is still significant uncertainty for the months ahead with the latest industry forecast projects modest annual growth for 2020, followed by more substantial sales increases in 2021 (click here for more).

In the 2020 year to 8 July, AEM Holdings has ranked amongst the 30 most traded stocks, while UMS Holdings has ranked amongst the top 50 traded stocks.

The comparative performances of the five Singapore stocks, relative to the global median and the SOX Index are illustrated below.

As detailed in the table below, AEM Holdings’ outlier performance skewed the average total return of the five stocks to 10%, with the median decline in total return at 1%, more or less aligned with the  global semiconductor stocks outside the top quartile by market value that posted a median 2% total return.

Source: SGX, Bloomberg, Refinitiv (Data as of 8 July 2020)

The five Singapore stocks all maintain a lower total debt to total asset ratio than the median for the industry which is at 12%. At the same time the five also maintain a lower P/E ratio than the global median at 42x, despite the five averaging returns at 60% in 2019 that were highly aligned with the global median gain of 62%.

The five stocks have also suited shorter term momentum traders in the 2020 year to date, with average declines of 36% in the declines to 23 March, followed by average gains of 73% between 23 March and 8 July. AEM Holdings saw net institutional buying close to S$5 million in the first 12 weeks of 2020, which then expanded to more than S$40 million between 24 March and July. Avi-Tech Holdings has also seen net institutional buying from 24 March to 8 July, while UMS Holdings saw net institutional buying in early 2020. 

#26 Most Traded Singapore Stock in 2020 YTD - AEM Holdings Executive Chairman Loke Wai San.AEM Holdings reported a record FY19 (ending 31 Dec) financial performance, achieving revenue of S$323.1M and operating profit before tax of S$63.7M with revenue guidance for FY20 between S$430M and S$445M. AEM has built up its capabilities in advanced testing solutions over the past few years, enabling the company to tap on the growth of system-level testing from wafer level to package level, panels and interconnects. For instance, in FY19, its key customer introduced new products based on advanced semiconductor nodes, which saw the sales momentum pick-up for AEM Holdings’ High-Density Modular Test (HDMT) units.  In FY2019, AEM also made it to Forbes Asia’s 200 Best Under A Billion List for the first time. For the FY19 Annual Report, titled ‘The Future is Now’ click here. In a response to a question at its FY19 AGM, AEM Holdings noted its main competitors in the business of test handlers and semiconductor testers are Teradyne Inc, Cohu Inc., Advantest Corp and Chroma ATE Inc, which are all listed companies.  The four stocks averaged a 66% total return in SGD terms from 23 March to 8 July, in comparison to AEM’s 132% gain. AEM has five manufacturing plants located in Singapore, Malaysia (Penang), China (Suzhou), Finland (Lieto) and France (Saint-Just Malmont) with a network of sales and field services offices, associates and distributors to maintain a global market presence spanning Asia, Europe and the United States.

#44 Most Traded Singapore Stock in 2020 YTD - UMS Holdings

UMS Holdings is in the business of front-end semi-conductor equipment contract manufacturing and also involved in complex electromechanical assembly and final testing devices. For its 1QFY20 (ended 31 Mar) UMS Holdings posted a 53% jump in net profit attributable to shareholders to $10.7 million as revenue grew 22% to $34.9 million.

Chairman & CEO Andy LuongThe company noted that compared to a year ago, the semiconductor segment saw a robust improvement in customer demand as revenue from its integrated systems business and component sales grew by 3% and 29% respectively.

UMS Holdings did also caution that, according to Gartner, Inc., worldwide semiconductor revenue is forecast to decline 0.9% in 2020 and that supply chain disruptions caused by the outbreak, tough government measures to contain the contagion, have also weighed on the industry. 

Longer-term, UMS Chairman and CEO Andy Luong noted that the outlook however remains positive due to the acceleration of 5G, artificial intelligence and other technology-driven developments such as Smart Cities and the increased demand for data. Headquartered in Singapore, the Group has production facilities in Singapore, Malaysia and the United States.

Click here for the FY19 Annual Report.

This article first appeared on the SGX website.