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Acromec Ltd’s Latest Earnings: Strong Growth Seen

Yesterday evening, Acromec Ltd  (SGX: 43F) released its earnings for the first-half of its fiscal year ending 30 September 2016 (fiscal 2016). The reporting period was for 30 September 2015 to 31 March 2016.

For some context later, Acromec, which got listed less than two months ago, provides specialist engineering services for the design and construction of controlled environments such as laboratories, medical and sterile facilities, and clean rooms. It also provides maintenance services for controlled environments.

You can read more about the company’s initial public offering (IPO) in here or find out more about its business in here. With that, let’s take a look at Acromec’s latest results.

Financial and operational highlights

The following’s a quick rundown on some of the latest financial figures for Acromec:

  1. Revenue for the reporting period increased by 186% year-on-year to $23.2 million.
  2. Meanwhile, profit attributable to shareholders soared by 221% from $0.5 million to $1.6 million, despite higher administrative and one-off IPO expenses.
  3. Consequently, Acromec’s earnings per share (EPS) more than tripled from 0.54 cents a year ago to 1.72 cents.
  4. Cash flow from operations for the reporting period came in at $3.71 million with capital expenditures working out to be just $69,000, giving the firm a healthy $3.64 million in positive free cash flow. These figures are also a stark improvement from the negative free cash flow of $1.39 million seen a year ago (negative $1.32 million in cash flow from operations and $69,000 in capex).
  5. As of 31 March 2016, Acromec maintains a pristine balance sheet with $10.3 million in cash and equivalents and zero borrowings.
  6. Acromec has the intention to distribute at least 20% of its net profit as dividends for FY2016 and FY2017. For the first-half of FY2016, Acromec had declared an interim dividend of 0.3 cents per share, which is 17% of its earnings per share for the reporting period.
  7. Lastly, Acromec had ended 31 March 2016 with an order book of $30 million.

The firm’s top-line growth was “due to increased business activities” which in turn “stemmed from a strong order book.”

Prospects and valuation

In the earnings release, Acromec commented that it “sees promise in the sectors that it serves, particularly the healthcare, biomedical, research and academia sectors.” The company added:

“The prospects for the Group in the healthcare sector is buoyed by the Government’s major plans to increase infrastructure spending through building new hospitals and medical facilities and refurbishing existing ones so as to cater for Singapore’s ageing population.

Likewise, the biomedical, research and academia sectors is expected to grow on the back of the Government’s bold initiatives to make Singapore a knowledge-based centre and a research and development hub of the region.”

But, Acromec also cautioned that “Singapore and the region is experiencing slower growth, amid uncertainty in the macroeconomic environment.” As such, competition “is expected to remain keen,” which may result in pressures on Acromec’s margins.

At its closing price of $0.475 yesterday, Acromec traded at 9.9 times trailing earnings.

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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 James Yeo owns shares in Acromec.