Micro-Mechanics posts 84% higher net profit of $2.2mil for 1Q

Micro-Mechanics (Holdings), the manufacturer of high precision parts, said net profit for the three months ended 30 September 2013 (1Q14) grew 83.9% to $2.2 million.

The sharp improvement in the group’s bottom line in 1Q14 was led by a 12% increase in group revenue to $11.1 million, coupled with higher gross profit margin and a tight rein on its expense structure.

The group’s semiconductor tooling business, which serves customers involved in the assembly and testing of semiconductors, posted 9.4% higher sales of $9.4 million in 1Q14 to account for 85% of total revenue.

Sales of its Custom Machining & Assembly (CMA) division jumped 29.6% to $1.6 million in 1Q14 as the group benefited from increased orders following the shift to 24/7 machining at its CMA factory in the US.

Chris Borch, CEO of Micro-Mechanics, said, “During 1Q14, we continued to see promising results from the investments and energy we have put into improving the group’s sales and operational efficiency. On top of increased sales, both our semiconductor tooling and CMA divisions recorded higher gross profit margin on the back of productivity gains. As a result, the group’s overall gross profit margin expanded to 51.3% during 1Q14 from 49.0% in 1Q13. To counter the cost and pricing pressures that are typical of the semiconductor industry, we plan to work non-stop to improve our operational efficiency, cost structure and cycle time.”

As at Sep 30, the group has total assets of $46.6 million, shareholders’ equity of $39.6 million, cash and cash equivalents of $11.2 million and no bank borrowings.

Tech sector's outlook seen muted-OCBC

OCBC Investment Research said Singapore technology companies have generally reported lacklustre results for the second quarter of 2012 and their outlook is uncertain with headwinds
such as weak order visibility and rising cost pressures.

Previous expectation of a robust sequential recovery in the seasonally stronger second half have dwindled in the past few months due to uncertainties over the euro zone crisis, as well as sluggish economic growth in the United States and China, OCBC said.

But OCBC said a bright spot during the quarter came from “decent” dividends declared by some technology companies, supported by their balance sheet strength and management’s commitment to reward shareholders with regular dividend payouts.

The expected launch of new programs and products such as ultrabooks, Microsoft’s Windows 8 operating system and Apple’s iPhone 5 could help to buffer some of the near-term weakness,
OCBC added.

OCBC’s top pick in the sector is Venture Corp. It also covers ECS Holdings, Karin Technology Holdings and Micro-Mechanics Holdings.

Micro-Mechanics Holdings rated 'hold' by OCBC

OCBC Investment Research in a Jan 30 research report says: "Micro-Mechanics (MMH) reported a lacklustre set of 2QFY12 results. Net profit dipped 58.5% y-o-y and 39.9% q-o-q to $0.7 million on the back of a 23.6% y-o-y and 15.9% q-o-q decline in its revenue to $8.7 million.

"For 1HFY12, revenue of $19.1 million (-17.3%) formed 46.9% of our full-year forecast while net profit of $2.0 million (-47.5%) constituted 42.2% of our FY2012 estimates. A cash dividend of 1 cent was declared, in line with our expectations. We cut our FY2012 revenue forecast by 7.3% and net profit forecast by 16.6% in view of the worse-than-expected set of results.

"While we expect conditions to pick up in FY2013, we still see the need to lower our revenue and net profit projections by 5.6% and 15.0% respectively. Fair value estimate declines from 30.5 cents to 29 cents as we also roll forward our valuation to 9x blended FY12/13F EPS. MAINTAIN HOLD."

Jan 30: Parkway Life REIT, Mewah, SBI Offshore, Micro-Mechanics

Singapore shares may tread lower on Monday, weighed by slower-than-expected growth in the United States and as poor earnings from major blue chips such as Chevron Corp dragged on US equity indices.

The benchmark Straits Times Index rose 0.75% on Friday to 2,916.26 points. Here are some stocks and factors to watch, says Reuters:

Parkway Life Real Estate Investment Trust may be in focus after it posted a 3.2% increase in its fourth quarter distribution per unit to 2.47 cents, helped by higher rents in Singapore and contributions from a recently acquired nursing home in Japan.

Palm oil firm Mewah said a court has dismissed all charges against its subsidiary Mewah-Oils Sdn Bhd and its chairman Cheo Tong Choon. Both had been accused of receiving stolen crude palm oil and falsifying customs-related documents.

Oil and gas firm SBI Offshore said on Saturday it has won US$30 million ($37.6 million) worth of new orders since the start of the year from its customers, including rig builders in Asia and international drilling contractors.

Micro-Mechanics, which makes high precision tools, said its net profit for the six months ended December fell 47% to $2 million, hurt by slower sales due to global uncertainties.

Micro-Mechanics Holdings rated 'hold' by OCBC

OCBC Investment Research in an Oct 10 research report says: "In light of the weakening macroeconomic environment which is expected to take its toll on the cyclical tech sector, we are lowering our estimates for MMH and now expect revenue and net profit to decline by 1.3% and 7.8% instead of a 4.8% and 2.1% rise in FY2012 respectively (FY2013 earnings estimates also cut by 8.1%).

"Notwithstanding our lower forecasts, we are keeping our dividend estimates for FY12 at 3 S cents, unchanged from FY2011. At this level, it implies a prospective yield of 6.7%, which should provide some downside support to MMH's share price. new fair value estimate of 45 cents (previously 50 cents), still based on 10x FY12F EPS. MAINTAIN HOLD."

Micro-Mechanics Holdings rated 'buy' by OCBC

OCBC Investment Research in a may 5 research report says: "Micro-Mechanics (MMH) reported its 3Q11 results which were within our expectations. Revenue rose 9.8% y-o-y to $11.1 million and net profit jumped 31.6% y-o-y to $1.7 million.

"Regarding the recent Japan earthquake and tsunami, MMH indicated that it had experienced minimal direct impact from its customers and supply chain so far. Looking ahead, MMH does not foresee any significant impact of this crisis on its FY2011 results, barring any unforeseen circumstances.

"We continue to like MMH for its healthy balance sheet (net cash) and attractive prospective dividend yield of 6.1%. We are keeping our estimates intact as its 3QFY11 results have met our expectations. Fair value estimate of 67 cents, still based on 12x blended FY2011/2012F EPS. MAINTAIN BUY."