An independent semiconductor foundries whose primary business is the manufacture, or 'fabrication', of semiconductors, sometimes called 'chips' or 'integrated circuits', for others.
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Recs
This a Dec review of a pick I made back in May, done to determine what my strategy will be for it today.
The first thing I notice about UMC is that the stock has not done anything for shareholders for the last eight years. When you start going back further than that, you are now talking about a significant loss of capital.
Their operating performance the past three years has been absolutely dismal, especially compared to their much larger competitor, Taiwan Semi. More recently, their November sales rose 14 percent from a year ago, but were the smallest in five months. It looks like 2010 results will be close to $0.30 a share.
The financial position is solid, with $2B in cash and negligible long-term debt. Dividend yield is 1.6% and short interest is almost non-existent.
An attempt to acquire all of the holding company that owns the Chinese firm He Jian Technology Suzhou was recently thwarted by Taiwanese regulatory issues, so they’ll be looking for other ways to expand their footprint onto the mainland (Taipei stood in the way of the deal because investment regulations there stipulate that there can be no more than three Taiwan chip fabs in China, and all three are already spoken for). In Oct 2010, they announced a small investment in Parade Technologies (Shanghai).
Despite results improving since the Great Recession, their P/E remains among the lowest of any stock in the Semiconductors industry. While their bounce back to profitability is encouraging, little profit growth is expected in 2011 and the current stock price reflects the same.
Since I don’t have any sort of edge in this name, I am relying on future positive results, a general improving investor outlook on an economic recovery and/or the current momentum shift that is occurring in its trading to drive the price higher.
All in all, UMC has been a rather poor investment with occasional trading opportunities, so only a short-term hold is warranted from my viewpoint.