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What Investors Need to Know About Micro-Mechanics (Holdings) Ltd’s Latest Earnings

Over the weekend, Micro-Mechanics (Holdings) Ltd (SGX: 5DD) announced its financial results for the second quarter ended 31 December 2017 (2Q 2018). Here are 10 things investors should know from the earnings announcement:

1. For the second quarter, revenue rose 10.3% year-on-year to a record S$15.7 million. For the first six months of the year, revenue soared 21.1% to S$33.3 million, and this was mostly due to better sales in Malaysia, Singapore, the Philippines, China and the USA.

2. China, Malaysia, and the USA remain Micro-Mechanics’ largest geographical markets.

3. Net profit for 2Q 2018 was S$3.9 million, an increase of 16.1% jump from the same quarter last year. For the first half of FY2018, the bottom line surged 34.6% to S$9.1 million.

4. The 16.1% year-on-year improvement in quarterly net profit was on the back of “higher revenue, better gross profit margin and a continued tight rein on expenses”.

5. Diluted earnings per share (EPS) for the reporting quarter went up by 16.1% to 2.81 cents. The company’s diluted EPS for the first half of FY2018 was 6.53 cents, up 34.6% year-on-year.

6. As at 31 December 2017, the balance sheet carried S$22.4 million in cash with zero debt. The balance sheet remains healthy. This is also an improvement from a year ago when there was slightly less than S$21 million in cash and no debt.

7. Total trade receivables, as at 31 December 2017, was around S$11 million, with no amount outstanding for 90 days or more.

8. Operating cash flow for the reporting quarter was up a commendable 56.6% year-on-year from S$4.8 million to S$7.5 million. Due to an increase in capital expenditure from S$1.3 million to S$3.8 million, Micro-Mechanics’ free cash flow grew by 6% from S$3.5 million to S$3.7 million. The capital expenditure of S$3.83 million in the fiscal second-quarter was mainly for new machines purchased for its factories in Malaysia, the Philippines, China and the USA. However, for the first half of FY2018, Micro-Mechanics’ free cash flow fell by 14.1% from S$6.9 million a year ago to S$5.9 million.

9. An interim dividend of S$0.04 per share was declared, a 33.3% increase from the interim dividend of S$0.03 per share dished out a year ago.

10. Looking ahead, Micro-Mechanics’ chief executive, Chris Borch, said:

“Current market forecasts point to an upward trajectory for global chip sales in 2018. We believe this positive outlook is underpinned by the prevalence of semiconductors in our daily lives. However, we expect to see continued price and cycle-time pressures as the chip industry is increasingly driven by price-sensitive consumer applications. We will also need to manage challenges from rising costs and shortage of skilled workers. As the Group grows, we plan to continue automating our operations, streamlining our processes and using technology to leverage the know-how and skills of our people.”

At Friday’s closing share price of S$2.42, Micro-Mechanics had a trailing price-to-earnings ratio of 19.7 and a trailing dividend yield of 3.7%.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has recommended shares of Micro-Mechanics (Holdings) Ltd. Motley Fool Singapore contributor Sudhan P owns shares in Micro-Mechanics (Holdings) Ltd.