SINGAPORE (Sept 3): UMS Holdings has been steadily increasing its hold on JEP Holdings, a listed company that it controls. On Aug 27, it acquired two million JEP shares via a married deal at 19.5 cents each. On the same day, UMS also bought 100,000 shares at 20 cents each from the open market, bringing its stake in the company to just over 111.2 million shares, or 28.95%.
UMS had made several rounds of purchases in the fortnight leading up to Aug 27. It started buying on Aug 15, snapping up 380,800 shares at 19.408 cents each. It bought 70,000 shares at 19.564 cents each on Aug 16; 263,000 shares at 19.99 cents each on Aug 17; 606,500 shares at 19.963 cents each on Aug 20; 223,700 shares at 20 cents each on Aug 23 and 132,700 shares at 20 cents each on Aug 24.
Executive chairman Andy Luong assumed control of JEP in January. Via UMS, he bought a 29.5% stake in JEP for $28.2 million cash from JEP’s founder and former executive chairman Joe Lau and executive director Zee Hoong Huay. Following the conversion of warrants into shares in March, UMS’s stake was trimmed to 28.77%.
Luong is better known as executive chairman of UMS. The company, which helps build semiconductor equipment, is favoured by investors, who like its relatively high dividend payouts. Year to date, JEP has dropped 2.44% to close at 20 cents on Aug 29. UMS, on the other hand, has fallen 23.79% over the same period to close at 77 cents.
In addition to being executive chairman, Luong has also taken on the role of interim CEO of JEP as he tries to restructure the company’s operations. For the six months ended June 30, JEP reported revenue of $43.6 million, up 10.5% from the year-earlier period. However, the company slipped into losses of $192,000, from earnings of $10,000 a year earlier. During the period, JEP suffered foreign exchange losses owing to unfavourable movements of the Singapore dollar against the yen and US dollar. In addition, its administrative expenses increased to $3.8 million from $3.1 million as a result of a one-off early retirement package of $500,000 paid to Lau, who left on June 1.
In its 1HFY2018 earnings statement, JEP says it expects the aerospace segment to remain its largest revenue contributor, led by demand for precision parts as air passenger traffic enjoys healthy growth. It is not so optimistic about its oil and gas segment, though, calling it “challenging” and fraught with “uncertainty” despite oil prices recovering “substantially” in recent months.
JEP also expects to improve its operational efficiency and productivity. In an interview with The Edge Singapore earlier this year, Luong said its new manufacturing facility at Seletar Aerospace Park was underutilised. He plans to relocate some manufacturing activities to lower-cost Penang, where UMS already operates. Luong hopes that running the operations of both companies from one location will bring about greater efficiency.
The $35 million Seletar facility has saddled JEP with a heavy financing burden. In addition to higher administrative expenses and an unfavourable foreign exchange rate, the company’s bottom line for the six months ended June 30 was weighed down by financing costs. JEP incurred a higher interest cost of $751,000 for 1HFY2018, compared with $563,000 for the previous corresponding period. As atJune 30, it had short-term debts of $13.3 million and long-term liabilities of $26.7 million
