Opinions
Darren Sissons
United Microelectronics Corporation
UMC-N
BUY ON WEAKNESS
Feb 09, 2024
Stock price when the opinion was issued
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UMC is a Taiwanese company, operating as a semiconductor wafer foundry, and is now trading at 11x times' Forward P/E. In the last five years, sales grew around 10% on average, mostly organic growth. The balance sheet is strong, with a net cash of Taiwan NT115B(or around $3.7B). The company has been reinvesting heavily to pursue organic growth, while dividends also grew at an impressive pace over the last few years. However, the semiconductor industry is quite cyclical. Based on consensus estimates, sales are expected to decline by 24% in FY 2023, and then recover to around 12%-15% over the next few years. Overall, solid company, cheap valuation, strong balance sheet, and we like the name. Keep in mind we do not follow international names closely, however.
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Semi-conductor business is best played through "Tier 1" companies. Taiwan Semi/Samsung are the best options. This company is a 2nd or 3rd rate option for investors. Stock price very high. Would wait for share price to fall before investing. Overall a strong sector.