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Tech Earnings Take Spotlight as AEM & UMS Form Fresh All-Time Highs

Posted November 15, 2021 at 12:00 pm
Singapore Exchange
  • Last week, four of the six most traded Technology stocks listed on SGX: AEM, UMS, Frencken and ISDN provided 3QFY21 Business Updates. The reports coincided with AEM Holdings and UMS Holdings forming fresh all-time highs in subsequent sessions.
  • UMS reported record revenue and profit for 9MFY21, surpassing FY20 full year revenue and profit. Frencken‘s 9MFY21 revenue was up 25% from 9MFY20, and up 16% from 9MFY19 (with FY19 a record revenue year). ISDN also reported a 9MFY21 net profit record, and for 3QFY21 delivered its most profitable quarter in its history.
  • AEM Holdings raised its FY21 revenue guidance to between S$525 million and S$550 million, higher than the FY20 record revenue of S$519 million, and S$323 million in FY19. For the subsequent two sessions, AEM was recipient to S$38.2 million of net institutional inflow and rallied 14.1%.
  • All four stocks acknowledged strong demand for semiconductors. With digital transformation and other secular technology trends, SEMI estimate global semiconductor equipment investments for front end fabs in 2022 are expected to reach nearly US$100 billion, after topping a projected US$90 billion investment in 2021.

The market value of global technology stocks has tripled over the past five years to US$23 trillion. Since global technology stocks were re-rated at the beginning of 2016, Singapore’s five most traded technology stocks that have been listed for the duration, generated median total returns close to 500%, ranging from a 203% total return for Venture Corporation to an 11,135% total return for AEM Holdings. All five have provided 3QFY21 (ended 30 Sep) Business Updates, with four of the five stocks reporting last week.

These Business Updates have come as the recent EDB Business Expectations Report maintained manufacturing optimism was largely led by the semiconductors segment which continues to expect robust demand from the 5G market, cloud services and data centres. On a global scale, industry association SEMI maintains the global semiconductor manufacturing equipment market is expected to continue growing at a 9.6% CAGR from 2021 through to 2026. This is amid supportive trends led by various technological advancements such as the utilisation of AI solutions and the integration of connected devices with IoT. The Philadelphia Stock Exchange Semiconductor Index has gained 40.3% in the 2021 year to 12 Nov, while the five aforementioned Singapore-listed technology stocks have averaged 51% total returns. The performances of the five stocks are tabled below.

Five Most Traded Technology Stocks Listed on SGX (that have been listed since 2015)CodeMkt Cap S$M4Q21 to 12 Nov Total Return  %YTD Net Insti Inflow S$MYTD Total Return %9MFY21 YoY Revenue Growth %Total Return % (since 31 Dec 2015)
Average  7 51 2,708
Median  5 62 491

 Source: SGX,  Refinitiv, Bloomberg (Data as of 12 Nov 2021)

While the five above tabled stocks represent some 1% of the total combined market capitalisation of all stocks listed in Singapore the five contribute close to 5% of the combined day-to-day turnover. AEM Holdings, UMS Holdings, Frencken Group and ISDN Holdings all provided 3QFY21/9MFY21 Business Updates last week. Highlights were as follows:

  • AEM Holdings reported 9MFY21 revenue of S$339 million, while raising FY21 revenue guidance to between S$525 million to S$550 million, after providing revenue guidance of S$460 million to S$520 million with its 1HFY21 results. This puts the guidance higher than the FY20 record revenue of S$519.0 million, and S$323.1 million in FY19. AEM Holdings noted its 9MFY21 revenue was 22.3% lower YoY as its key customer prepared to phase over to our next generation test platforms during the first half of FY21, while highlighting that in-line with Industry Research, there has been a volume ramp in System Level Testing, which AEM Holdings expects to continue through 4QFY21 and into FY22. AEM also noted it had also made significant progress in its technical engagements with 10 out of the top 20 semiconductor companies. Also, at an industry level, AEM Holdings acknowledged that significant investments are being made in the front-end, as evidenced by Intel’s, TSMC’s and Samsung’s announcements of new fabs breaking ground. With front-end investments typically leading back-end investments by several quarters, AEM Holdings foresees a potential expansion of its serviceable market.
  • UMS Holdings reported record revenue and record profit for 9MFY21, surpassing FY20 full year revenue and profit. For the quarter, its semiconductor component sales surged 99% YoY to S$37.8 million, while semiconductor Integrated Systems sales eased 6% to S$22 million, due to tighter COVID 19 guidelines imposed by the Malaysian Government, resulting in temporary production constraints in August and September. Except for Taiwan, all the Group’s key geographical markets grew substantially in 3QFY21, supporting the 53% YoY growth in 9MFY21 revenue. UMS Holdings cited SEMI estimates that global fab equipment spending is expected hit another record high in 2022 digital transformation and other secular technology trends the key drivers. SEMI project global semiconductor equipment investments for front end fabs in 2022 is expected to reach nearly US$100 billion, after topping a projected US$90 billion investment in 2021. The Group also noted the potential upswing in Aviation with the 2021 Boeing Market OutlookPrior to COVID-19, the aviation industry was undergoing a modernization phase, supported by advanced electronics and semiconductors.   
  • Frencken Group reported its 9MFY21 revenue grew 25% YoY to S$571.8 million, driven by sales growth of the semiconductor, analytical, medical and automotive segments. The 9MFY21 revenue was also up 16% from 9MFY19, with FY19 a record year for Frencken Group in full year revenue. In 3QFY21 Frencken Group’s Semiconductor sales within the Mechatronics Division surged 42.7% YoY to S$71.6 million. The Group noted that in 2HFY21, compared to 1HFY21, the semiconductor segment is anticipated to post stable revenue, with the Medical and Analytical segments expected to grow, while the Industrial Automation and Automotive segments are anticipated to soften.   
  • For its 3QFY21, ISDN Holdings reported its most profitable quarter in its history, with a 56.8% YoY gain to S$8.6 million. ISDN Holdings maintains the global semiconductor shortage and emerging semi supercycle are benefitting the groups business with the ongoing shift to advanced IC manufacturing and packaging, benefitting the group’s semiconductor segment. The group also noted it is continuing to see growth as its 10,000+ customers shift towards more advanced industrial automation, including labor automation, machine intelligence and increasingly bespoke capabilities and its solutions power manufacturing and products for key next-generation technologies including Industry 4.0, 5G, cloud/edge computing, advanced medical equipment, and clean technology.   

While not among the top six traded technology stocks by turnover, Grand Venture Technology is one of 27 stocks among the 200 most actives in 2021 that have seen day-to-day turnover surge 10-fold or more from 2020 levels. The Group is also currently pursuing a transfer from the Catalist Board to the Mainboard. Back on 3 Nov, Grand Venture Technology provided its 3QFY21/9MFY21 business update, highlighting 115% YoY revenue growth in the semiconductor segment to $62.5 million in 9MFY21, attributed to the global ramp up in demand for semiconductor chips, in tandem with the macro demand for digitalisation, smart electronics, cloud computing, 5G, electric vehicles, artificial intelligence, and IoT. This saw the semiconductor segment make up 73% of its 9MFY21 total revenue, up from 67% in 9MFY20.

Also on 3 Nov, when reporting 9MFY21 revenue had grown by 0.8% YoY, Venture Corporation noted that for the next 12 months, it expects several new products to be launched into the markets globally, including products uniquely emanating from Venture’s R&D labs and manufacturing sites. The Group is also seeing strong trends in New Product Introductions activities, which are expected to flow through to mass production at its manufacturing sites over the next 12 months. With Venture maintaining it is at a crucial stage in its strategic evolution, it also noted on 3 Nov that it has established two panels comprising specialists in selected fields have been established to support the Group’s strategic directions. On 8 Nov, Venture Executive Chairman Wong Ngit Liong acquired 200,000 shares of the company at an average price of S$18.73 per share, taking his direct interest in Venture from 7.04% to 7.11%. Mr Wong’s preceding acquisition of Venture shares via market transactions were back in 2017 with 400,000 shares of Venture purchased at S$15.26 per share in September and 271,600 shares purchased at S$12.51 per share in July of that year. The acquisitions in July 2017 and November 2021 were both conducted when Venture was trading at an 18x earnings multiple.

With an average daily turnover of S$9.2 million, Nanofilm Technologies International has ranked as Singapore’s fourth most traded Technology stock this year, with the 13% decline in total return in the 2021 year to 12 Nov, trimming its total return since listing on 29 Oct 2020 to 48.6%. Back on 14 Oct, Nanofilm Technologies International announced the appointment of Mr Gary Ho as Chief Executive Officer, while noting that the Group continued to build up its revenue pipeline in 3QFY21, with multiple strategic projects under development and an increasing number of New Product Introduction projects that will contribute positively to revenue in 4QFY21 and beyond.

As maintained by the Semiconductor Industry Association, semiconductors power the modern world and enable the systems and products that we use to work, communicate, travel, entertain, harness energy, treat illness, make new scientific discoveries, and more. The demand for semiconductors has impacted both the Singapore manufacturing sector in 2021, in addition to a number of its most traded technology stocks.  

Originally Posted on November 15, 2021 – Tech Earnings Take Spotlight as AEM & UMS Form Fresh All-Time Highs

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