SINGAPORE (Feb 10): Micro-Mechanics (Holdings) is pleasing shareholders with higher earnings, higher dividends, and, is volunteering to continue with quarterly reporting even though it is not obliged to under new SGX rules.
“Transparency and good corporate governance are more than just ticking boxes on a scorecard and compliance,” said the company in its earnings announcement on Feb 8.
“Accurate, complete and timely information is the foundation for sound decision making – not just for investors – but for everyone at Micro-Mechanics from the board room to the shop floor,” the company added.
Micro-Mechanics, which makes precision parts for the semiconductor industry, has reported a 7.4% y-o-y increase in revenue to $16.3 million for 2QFY2020 ended Dec 31 2019.
However, thanks to better margins, its earnings increased by 14.4% y-o-y to $3.6 million in the same period.
During the quarter, the company enjoyed higher sales in China, Singapore, Japan and Taiwan, but suffered lower sales from its customers in the Philippines, Malaysia and Europe.
As part of its on-going bid to be more efficient, its gross margin improved from 52.4% in 2QFY19 to 53.9% in 2QFY2020. The growth in revenue in 2QFY2020 was the first quarterly year-on-year growth since 4QFY18.
“We believe this reflects the improving stability of the global semiconductor industry from the cyclical downturn that began during the second half of calendar year 2018,” said CEO Chris Borch (picture)
“The higher revenue, coupled with our continuous efforts to enhance manufacturing processes, productivity and cost structure, drove the improvement in the Group’s profitability during 2Q20,” he added.
Citing data from the World SemiconductorTrade Statistics, Micro-Mechanics sees a recovery in worldwide semiconductor sales this calendar year of 5.9%.
Taking into account its financial position and “modest capital requirements” this FY, the company will be paying out an interim dividend of five cents per share, up from four cents in the year-earlier period.
As at Dec 31 2019, Micro-Mechanics is debt-free, and holds cash and cash equivalents of $19.2 million.
Now, just like every company with operations in China, Micro-Mechanics has been impacted. On Jan 29, it announced that its plant in Suzhou will be closed till Feb 9 as required by the local governments to stem the coronavirus outbreak.
“Because it can be difficult to accurately assess the economic impact of this situation, or any other sudden or unexpected event, we prefer to focus as much as possible on the industry’s long term trends and try not to get preoccupied by short-term variations,” the company said.
“We continue to believe the semiconductor industry is poised for a prolonged period of solid growth,” the company added.
Year to date, Micro-Mechanics’ share price has dropped 5% to trade at $1.85 as at noon on Feb 10.
At this level, the company is valued at just below 22 times historical earnings and has a market value of$255.8 million.