Micro-Mechanics' FY2013 net profit increased by 21% yoy to S$5.1m. The group’s stronger bottom line performance was achieved on the back of higher gross profit margin and its tight rein on expenses as revenue in FY2013 was relatively flat at S$39.1m, compared to S$38.8m in FY2012.
The group's 4Q13 revenue was up 4% yoy to S$10.8m and a sequential gain of 16.8% qoq. The group’s net profit in 4Q13 also rose 13.2% yoy to S$1.5m, its highest level since 3Q11.
The board has declared a final dividend of 2 cents per share, payable on 19 November 2013. This will bring total dividends for FY2013 to 3 cents per share, unchanged from FY2012. Since going public in 2003, the group has distributed yearly dividends totaling 31.9 cents to shareholders.
Its semiconductor tooling business, which accounted for 86.3% of group revenue in FY2013, performed commendably on the back of positive sales growth and improved GP margin. The Custom Machining & Assembly (CMA) division had a difficult year, but is seeing encouraging results after improving its method for repeatable, scalable and cost-effective machining.
At the end of FY2013, its USA factory reached a key R&D milestone with nearly 100 parts engineered for production on its new 24/7 Machining Line. In July 2013, one of the key CMA customers ranked Micro-Mechanics as its best supplier with a score of 95 out of 100 points, including perfect marks for quality and on-time delivery.
According to management, growing the top line will remain a key priority in FY2014. Backed by its sound financial position, they will continue to focus on key customers and work to enhance the value to their business.
Key notes takeaway from results briefing:
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Semiconductor tooling business improved in tandem with industry recovery
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CMA affected by slower orders, especially from customers in the semiconductor equipment industry
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Malaysia, China, Taiwan, Philippines and Europe saw increased sales of semiconductor tools
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4Q utilization rate improved sequentially to 52% compare to 45% in 3Q13
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Achieved higher level of automation and improved production processes, as a result of headcount reducing by 21% compared to FY06/2011
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Capex spending this year expected to be slightly higher than FY13, mostly used for replacement and partially used to continuously upgrade its CMA equipment
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To reduce its currency risk, sales in USD has reduced from 60% to 50% currently
Valuation:
At S$0.46, Micro-Mechanics is trading at 12.5x historical PER, 1.7x PBR and ROE 13.5%. We believe the stock valuation looks fair at current level. However, given its strong balance sheet and good track record with dividend payout (6.5% yield currently), we think Micro-Mechanics is still a good company to invest in for the long-term. Its CMA division could be the key growth driver given this division is getting better after improving its unique recipe for repeatable, scalable and cost-effective machining. It is building a stable customer base in USA and its low utilization rate also provides room to grow when business picks up.