Yahoo Finance Reinstatement of UMS's pioneer tax status for Malaysian subsidiary a boost to bottomline: DBS
DBS is estimating UMS to report a 54% y-o-y growth in net earnings of $82 million for the FY2022.
The approval of the reinstatement of UMS’s pioneer tax status for one of its Malaysian subsidiaries will be a boost to its overall bottomline, says DBS Group Research.
On Sept 14, UMS’s subsidiary, Ultimate Manufacturing Solutions (M) Sdn. Bhd (Ultimate), had received notice of the approval from the Malaysian Investment Development Board (MIDA).
MIDA had also informed UMS of the relaxation of the employment conditions of Malaysian citizens under the Malaysian government’s 80% - 20% rule, subject to its current policies.
With the latest development, UMS said that it will make a write-back of the tax provisions made in its balance sheet in its upcoming results for the 3QFY2022 ending September.
The amount is said to come to around RM50 million ($15 million).
The group adds that it will submit another application to extend the pioneer tax status of Ultimate for another five years from 2023 to 2027.
“With the reinstatement of the pioneer tax status, we can expect the tax rate for the group to revert back to low teens of about 12% from our current projection of 20%,” writes the team, who has kept its “buy” call and target price of $1.83.
UMS also remains the brokerage’s top pick in the technology sector.
In addition, the reinstatement of the tax status could boost UMS’s net earnings for the FY2022 and FY2023 by $9 million to $10 million, or by 11% each.
“We currently project net earnings to grow 54% y-o-y to $82 million for FY2022, after a 46% y-o-y gain in FY2021,” the team adds.
Furthermore, it sees UMS’s growth momentum remaining strong, driven by strong demand.
“The group’s expansion plan is on track, with its new Penang factory scheduled for completion by end-2022. The new factory will substantially increase the current production capacity and position the group well to take on new orders from potential customers that are expanding in Southeast Asia,” notes the DBS team.
As at 4.27pm, shares in UMS are trading 3 cents higher or 2.31% up at $1.33.
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