The semiconductor industry is known for being cyclical as it experiences spikes and troughs in supply and demand.
Global semiconductor demand has weakened year to date as Taiwan Semiconductor Manufacturing Co (NYSE: TSM), or TSMC, one of the world’s largest microchip manufacturers, projected capital spending that came at the bottom of its forecast of US$32 billion to US$36 billion.
TSMC, however, will boost its advanced chip manufacturing capacity to catch up with the strong demand for chips driven by generative artificial intelligence (AI) applications such as ChatGPT.
Things may be looking up for the industry, too.
The World Semiconductor Trade Statistics (WSTS) has published its latest forecast which projects that the global semiconductor market will experience a 10.3% year on year decline for this year.
For 2024, WSTS anticipates a strong recovery with growth at 11.8% year on year.
If you are looking for promising electronic-related Singapore stocks, here are four that can not only ride the recovery wave but also sport dividend yields of 4.9% or higher.
Valuetronics (SGX: BN2)
Valuetronics is an electronic manufacturing service provider with two reportable segments – consumer electronics and industrial & commercial electronic products.
The group is headquartered in Hong Kong but has manufacturing facilities in both China and Vietnam.
For its fiscal 2023 (FY2023) ending 31 March 2023, Valuetronics saw revenue slip slightly by 0.7% year on year to HK$2 billion.
Operating profit, however, rose 5.2% year on year to HK$132.9 million while net profit improved by 8.3% year on year to HK$123 million.
The group also generated a positive free cash flow of HK$163.5 million for FY2023, a reversal from the free cash outflow in FY2022.
Valuetronics proposed a final dividend of HK$0.10 and a special dividend of HK$0.06, taking FY2023’s total dividend to HK$0.20.
This works out to be a dividend of around S$0.0343, giving its shares a trailing dividend yield of 6.3%.
Looking ahead, Valuetronics has onboarded two new customers near the tail end of FY2023 and expects this duo to contribute a full year’s worth of revenue in FY2024.
However, the group warned that the impact of inflation and high interest rates may dampen consumer spending, thereby affecting revenue and margins for the next fiscal year.
UMS Holdings Ltd (SGX: 558)
UMS provides equipment manufacturing and engineering services to original equipment manufacturers (OEMs) of semiconductors and related products.
The group released a downbeat set of earnings for its 2023’s first quarter (1Q 2023).
Revenue dipped by 5% year on year to S$80.8 million while net profit declined by 10% year on year to S$17.4 million.
UMS generated a positive free cash flow of S$16.6 million for the quarter, though this was 11% lower than the S$18.7 million reported in the prior year.
Despite the weaker results, the group maintained its S$0.01 interim dividend.
The trailing 12-month dividend stood at S$0.05, giving its shares a trailing dividend yield of 4.9%.
UMS intends to strengthen its production capacity in Malaysia to capture new growth opportunities once global fabrication equipment demand resumes.
Venture Corporation Limited (SGX: V03)
Venture is a global provider of technology solutions, products and services and has a portfolio of more than 5,000 products and solutions catering to a variety of sectors such as life sciences, genomics, and consumer lifestyle.
The group saw revenue and net profit fall for its 1Q 2023 business update, dipping by 7.6% and 12.4% year on year, respectively.
The weaker results were due to near-term weakness in demand but Venture expects to commence mass production of new product introductions in the coming quarters.
For 2022, the group paid out a total dividend of S$0.75, giving its shares a trailing dividend yield of 5.1%.
Just last month, Venture announced a business restructuring that will see the formation of two core divisions – Technology Products & Solutions and Advanced Manufacturing & Design Solutions.
These two divisions will be led by their respective CEOs to help deepen the focus and drive the growth for each of these underlying businesses.
Micro-Mechanics (Holdings) Ltd (SGX: 5DD)
Micro-Mechanics (Holdings), or MMH, designs, manufactures and markets high-precision tools and parts used by the wafer fabrication and assembly processes of the semiconductor industry.
Due to the cyclical downturn, the group reported a weak financial result for the first nine months of fiscal 2023 (9M FY2023).
Revenue fell by 14.3% year on year to S$51.8 million while net profit plunged by 44.2% year on year to S$7.8 million.
Despite the weak numbers, MMH still generated a positive free cash flow of S$11 million.
The tool and parts manufacturer’s trailing 12-month dividend stood at S$0.14, giving its shares a trailing dividend yield of 7.8%.
MMH expects the semiconductor industry to continue slowing in the fourth quarter and the business environment to remain challenging.
This environment will continue until the supply-demand imbalance eases.
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Disclosure: Royston Yang owns shares of Micro-Mechanics (Holdings).
