Public Announcement: This will be the last article covering Micro-Mechanics Holdings Limited (“MMH”) till further notice. The reason is due to its relatively small market capitalization, which may in turn lead to speculation and manipulation. Furthermore, investors with large stakes may find it difficult to exit their position given the relatively low liquidity.
On 25 January 2025, MMH announced their half year results for FY2025. MMH continued to report decent results for FY2025, as compared to the lower base from FY2024. This will be good as there are now sufficient earnings per share to maintain a similar payout to the calendar year 2024, without having to adjust for depreciation accounting. Investors will need to monitor over the next few quarters if the recovery can be sustained, as well as management’s policies in relation to dividends.
Disclaimer: Not financial advice. All data and information provided on this site is for informational purposes only.
Website: Financial Statements And Related Announcement::Second Quarter And/Or Half Yearly Results
Photo source: https://www.micro-mechanics.com/
Financial Highlights
Revenue
| Metrics | Current | Previous |
|---|---|---|
| Revenue | +10.8% | +2.5% |
| Rating | Favorable | Favorable |
Revenue for the first half of FY2025 has increased by 10.8% to SGD32.5 million from SGD29.3 million for the same period in the previous financial year. Management has disclosed that the global semiconductor industry showed strong signs of recovery during the period, affirming the Group’s view that the industry is in the advanced stages of rebalancing production and inventory. The metric remains Favorable.
The World Semiconductor Trade Statistics (“WSTS”) revised its projections for the global semiconductor market in 2024, anticipating sales to grow 19.0% year-on-year to USD627 billion. In line with this trend of sustained growth, Group revenue increased for the fourth consecutive quarter to SGD16.3 million for the three months ended 31 December 2024.
Earnings per share
| Metrics | Current | Previous |
|---|---|---|
| Earnings per share | +46.6% | +13.9% |
| Rating | Favorable | Favorable |
Earnings per share for the first half of FY2025 has increased by 46.6% to SGD0.0434 per share from SGD0.0296 per share for the same period in the previous financial year. The significant increase was due to the increase in gross profit, as other expenses for MMH remained relatively unchanged during the period. The metric remains Favorable.
Operating Cash Flows
| Metrics | Current | Previous |
|---|---|---|
| Operating Cash Flows | +37.8% | +15.7% |
| Rating | Favorable | Favorable |
Cash flows from operations for the first half of FY2025 has increased by 37.8% to SGD9.6 million from SGD6.9 million for the same period in the previous financial year. The increase is in line with the increase of profit for the half year with no other significant changes noted. The metric remains Favorable.
Gearing ratio
| Metrics | Current | Previous |
|---|---|---|
| Gearing ratio | 16.9% | 17.5% |
| Rating | Favorable | Favorable |
Using the computation for Real Estate Investment Trusts (“REITs”), gearing ratio for MMH decreased to 16.9% as of 31 December 2024, with total assets of SGD58.2 million and total liabilities of SGD9.8 million. The metric remains Favorable.
Interest coverage
| Metrics | Current | Previous |
|---|---|---|
| Interest coverage | 51.5x | 24.9x |
| Rating | Favorable | Favorable |
The interest coverage increased to 51.5 times as of 31 December 2024, using profit before tax of SGD8.05 million and interest expense of SGD0.16 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 | 4.60 | 4.78 |
| Rating | Unfavorable | Unfavorable |
Price-to-book (“P/B”) ratio stands at 4.60. This is computed using the Net Asset Value (“NAV”) of the Group as of 31 December 2024 of SGD0.348 per share, and the closing share price of SGD1.60 as of 7 March 2025. 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 22% of the price they have paid.
As of 7 March 2025, the Market Capitalization is approximately SGD222 million.
Website: Yahoo Finance: Micro-Mechanics (Holdings) Ltd. (5DD.SI)
Dividend
| Year | Yield | Total |
|---|---|---|
| 2025 | 1.88% | SGD 0.030 |
| 2024 | 3.75% | SGD 0.060 |
| 2023 | 5.63% | SGD 0.090 |
| 2022 | 8.75% | SGD 0.140 |
| 2021 | 8.75% | SGD 0.140 |
| 2020 | 7.50% | SGD 0.120 |
The dividend payout in February 2025 is similar to the payout for the same period in the previous calendar year. The total expected dividend payout for the calendar year 2025 is likely to be similar to the payout in the calendar year 2024. This amounted to SGD0.060 per share.
With a closing share price of SGD1.60 as of 7 March 2025, this translates to a dividend yield of 3.75%. For my benchmark, a general reasonable yield would be around 5.25%. MMH’s dividend yield is below my benchmark and is Unfavorable.
Website: Reasonable Dividend Yield 2025Q1 – 5.25%
If using dividend yield of 5.25% 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 SGD1.14. Investors will thus need to be mentally prepared that the share price might further fall.
| Yield | Share Price | Downside |
|---|---|---|
| Current | 1.60 | – |
| 5.25% | 1.14 | -28.6% |
| 6.25% | 0.96 | -40.0% |
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 SGD0.0434 per share for the first half of FY2025, 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 for the calendar year 2025.
Summary
| Metrics | Financials | Rating |
|---|---|---|
| Revenue | +10.8% | Favorable |
| Earnings per share | +46.6% | Favorable |
| Operating Cash Flows | +37.8% | Favorable |
| Gearing ratio | 16.9% | Favorable |
| Interest coverage | 51.5x | Favorable |
| Price to Book Ratio | 4.60 | Unfavorable |
| Overall | Favorable |
Overall, the metrics indicate that it remains Favorable to invest in MMH. With the lower base of FY2024, this has allowed for FY2025 to perform better in comparison. Investors will need to monitor the next few quarters if this is able to be sustained, and if there are any changes to management dividend policies.
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): 2025 First Quarter Result
