On 30 October 2024, Micro-Mechanics Holdings Limited (“MMH”) announced their first quarter results for FY2025. With the lower FY2024 as a comparative base, it is noted that MMH has done better for itself this quarter. This may be a pleasant indicator that MMH is recovering from the previous semiconductor slowdown. Investors should continue to monitor over the next few quarters if the trend for MMH has indeed reversed.
Management has disclosed that according to World Semiconductor Trade Statistics (“WSTS”), global sales of semiconductors are expected to recover to their 2022 peak by the end of 2024. While this may be good news for MMH, the Group remains cautiously optimistic about the continued recovery of the semiconductor industry, particularly as macroeconomic and geopolitical uncertainties continue to evolve.
Disclaimer: Not financial advice. All data and information provided on this site is for informational purposes only.
Website: Financial Statements And Related Announcement::First Quarter Results
Photo source: https://www.micro-mechanics.com/
Financial Highlights
Revenue
| Metrics | Current | Previous |
|---|---|---|
| Revenue | +2.5% | -13.6% |
| Rating | Favorable | Unfavorable |
For the first quarter of FY2025, revenue increased by 2.5% to SGD16.2 million from SGD15.8 million for the same period in the previous financial year. This was also an increase from the previous quarter, which saw revenue of SGD14.9 million. Management has disclosed that this is generally in line with the trend of global semiconductor sales. The metric shifted towards Favorable, as this is an indication that MMH may have rebounded from a low base of FY2024.
Earnings per share
| Metrics | Current | Previous |
|---|---|---|
| Earnings per share | +13.9% | -17.8% |
| Rating | Favorable | Unfavorable |
Earnings per share for the first quarter of FY2025 increased by 13.9% to SGD0.0221 per share from SGD0.0194 per share for the same period in the previous financial year. This is in line with the increase in net profit by 14.0% to SGD3.1 million from SGD2.7 million for the same period in the previous financial year. The metric has shifted towards Favorable.
Operating Cash Flows
| Metrics | Current | Previous |
|---|---|---|
| Operating Cash Flows | +15.7% | -17.6% |
| Rating | Favorable | Unfavorable |
Cash flows from operations for the first quarter of FY2025 increased by 15.7% to SGD4.1 million from SGD3.6 million in the previous financial year. The increase is in line with the increase of profit for the quarter with no other significant changes noted. The metric has shifted towards Favorable.
Gearing ratio
| Metrics | Current | Previous |
|---|---|---|
| Gearing ratio | 17.5% | 19.0% |
| Rating | Favorable | Favorable |
Using the computation for Real Estate Investment Trusts (“REITs”), gearing ratio for MMH decreased to 17.5% as of 30 September 2024, with total assets of SGD59.2 million and total liabilities of SGD10.3 million. This metric remains Favorable.
Interest coverage
| Metrics | Current | Previous |
|---|---|---|
| Interest coverage | 24.9x | 23.3x |
| Rating | Favorable | Favorable |
The interest coverage stands at 24.9 times as of 30 September 2024, using profit before tax of SGD4.15 million and interest expense of SGD0.17 million. The finance costs mainly arose from their lease liabilities, as the Group has no external borrowings. The metric remains Favorable.
Price-to-book ratio
| Metrics | Current | Previous |
|---|---|---|
| Price to Book Ratio | 4.78 | 4.59 |
| Rating | Unfavorable | Unfavorable |
Price-to-book (“P/B”) ratio stands at 4.78. This is computed using the Net Asset Value (“NAV”) of the Group as of 30 September 2024 of SGD0.352 per share, and the closing share price of SGD1.68 as of 5 December 2024. This is Unfavorable, as the high P/B ratio translates to paying a huge premium for MMH business. In the scenario of a liquidation, investors will only be getting back 21% of the price they have paid.
As of 5 December 2024, the Market Capitalization is approximately SGD233 million.
Website: Yahoo Finance: Micro-Mechanics (Holdings) Ltd. (5DD.SI)
Dividend
| Year | Yield | Total |
|---|---|---|
| 2024 | 3.57% | SGD 0.060 |
| 2023 | 5.36% | SGD 0.090 |
| 2022 | 8.33% | SGD 0.140 |
| 2021 | 8.33% | SGD 0.140 |
| 2020 | 7.14% | SGD 0.120 |
The dividend payout for the calendar year 2024 amounted to SGD0.060 per share. With a closing share price of SGD1.68 as of 5 December 2024, this translates to a dividend yield of 3.57%. For my benchmark, a general reasonable yield would be around 5.00%. MMH’s dividend yield is below my benchmark and is Unfavorable.
Website: Reasonable Dividend Yield 2024Q4 – 5.00%
If using dividend yield of 5.00% as a benchmark, based on the expected dividend of SGD0.060 there is potential for MMH to see its share price drop by 28.6% to SGD1.20. Investors will thus need to be mentally prepared that the share price might further fall.
| Yield | Share Price | Downside |
|---|---|---|
| Current (3.57%) | 1.68 | – |
| 5.00% | 1.20 | -28.6% |
| 6.00% | 1.00 | -40.5% |
It was worth noting however that the dividend payout has been more than their earnings per share throughout history. For illustration, the dividend payout for 2024 is higher than the FY2024 earnings per share.
This is made possible given that depreciation expense, which is a non-cash expense, can be used to adjust the net profit into net profit before depreciation. The adjusted earnings per share will then be more than sufficient to cover the dividend payout. For FY2024, adjusted earnings per share is SGD0.105 per share which is sufficient to pay the expected dividend of SGD0.060 per share.
| Description | Amount |
|---|---|
| Net Profit | SGD 8,038,116 |
| Depreciation adjustment | SGD 6,509,666 |
| Adjusted net profit | SGD 14,547,782 |
| Number of shares | 139,031,881 |
| Adjusted earnings per share | SGD0.105 per share |
The issue with this is management signaling that there is not much capital expenditure required to replace their assets. Annual repair and maintenance will be sufficient to maintain their assets, which is cheaper than purchasing a new asset. Investors will need to take note if they are comfortable with the idea that their assets are able to last longer than the pre-determined useful lives as at reporting date.
For FY2025, with earnings per share of SGD0.0221 per share for the quarter, when annualized this is sufficient to sustain the dividend amount similar to the calendar year 2024 of SGD0.060 per share. Investors will need to monitor for management’s intention relating to dividend in 2025.
Summary
| Metrics | Financials | Rating |
|---|---|---|
| Revenue | +2.5% | Favorable |
| Earnings per share | +13.9% | Favorable |
| Operating Cash Flows | +15.7% | Favorable |
| Gearing ratio | 17.5% | Favorable |
| Interest coverage | 24.9x | Favorable |
| Price to Book Ratio | 4.78 | Unfavorable |
| Overall | Favorable |
Overall, the metrics indicate that it has shifted towards Favorable to invest in MMH. The results have shown improvement from FY2024, which may be an indication that MMH has been able to recover from its lower base. Investors will need to monitor the next few quarters if this is able to be sustained.
Background
MMH designs, manufactures, and markets high precision parts and tools used in process-critical applications for the semiconductor and other high technology industries.
The Group’s strategy is to relentlessly pursue product and operational improvements while providing fast, effective, and local support to its customers worldwide.
In addition to designing and manufacturing a market-leading range of consumable tools and parts used in the assembly and testing of semiconductors, the Group also engages in the contract manufacturing of precision parts and tools used in process-critical applications for the semiconductor wafer-fabrication and other high-technology industries.
MMH became a public corporation and listed on the SGX-Sesdaq in Singapore in June 2003. On 22 July 2008, the listing and quotation of its shares was upgraded to the SGX Mainboard. Since its listing, the Group has received multiple awards in recognition of its high standards of corporate governance, quality of disclosure, transparency and investor relations.
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Website: Micro-Mechanics Holdings Limited (SGX: 5DD): 2024 Full Year Result
