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Micro-Mechanics (Holdings) Ltd Boost Net Income By 39%

Micro-Mechanics (SGX: 5DD), a manufacturer of high precision tools, parts and assemblies for the semiconductor, medical and aerospace industry, announced on 25 Jan 2014 a 39% year-on-year gain in quarterly net profit to S$1.4m for the second quarter of its current financial year.

The Group has a semiconductor tooling segment, serving clients in the assembly and testing of semiconductors. The segment achieved higher sales in China, Malaysia and the Philippines. Its Custom Machining & Assembly (“CMA”), which assists high-technology capital equipment manufacturers, is starting to show growth, thanks to increased sales and rising operational efficiency.

Performance

The company has been able to achieve its bottom-line growth from a 13% year-on-year growth in revenue to S$10.5m for the quarter. Combined with improving margins (Micro-Mechanics’ gross margin improved from 48.8% to 50.8%), and a tighter control over expenses, the company’s net profit was able to expand rapidly..

Looking at each segment for the six months ended 31 Dec 2013, the semiconductor tooling business has grown its revenue by 8.4% year-on-year to $ 18.1m. The CMA division grew even faster, boosting revenue from S$2.4m to S$3.45m. That is a growth rate of around 44%.

For the last four years, the company’s dividend has been averaging about 3 Singapore cents a year. Micro-Mechanics has announced its plans to distribute an interim dividend of 1.0 cent per share (one-tier tax exempt) on 18 February 2014 for the current financial year.

Micro-Mechanics ends the quarter with a strong balance sheet, having cash & cash equivalents of S$10.0 million and zero debt.

Outlook

In its report for the quarter, the company mentioned that the Semiconductor Industry Association predicted global chip sales for the semiconductor industry to increase 4.1% to US$316.6 billion in 2014, which can bode well for the company if the forecast turns out accurate and Micro-Mechanics does not lose market-share.

At its current price of S$0.54 per share, Micro-Mechanics is providing shareholders with a dividend yield of 5.5% based on its full-year pay-out for its last completed financial year.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Stanley Lim doesn’t own shares in any companies mentioned.