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(Sept 18): Shareholders of Micro-Mechanics (Holdings) are in for a windfall as the company is set to pay its biggest dividend yet, following a strong performance in 1HFY2017. The high-precision tool maker has proposed a final dividend of four cents a share and a special dividend of one cent a share. This brings total dividends for FY2017 ended June 30 to eight cents a share, compared with six cents a share in FY2016.

“The group benefited from the strong pickup in the semiconductor industry during the past six months to achieve record revenue and net profit in FY2017,” says Micro-Mechanics CEO Chris Borch in a statement dated Aug 28. “In line with our consistent practice of rewarding our shareholders for their continuous support, we are pleased to share the group’s better performance with them by paying higher dividends for FY2017.”

The company’s revenue grew 11.7% to $57.2 million, up from $51.3 million in FY2016. Earnings increased 24.2% to $14.8 million, from $11.9 million previously. Its gross profit margin widened to 57.4% in FY2017, from 56.9% in FY2016. This came on higher capacity utilisation, as well as cost, productivity and cycle time improvements across its worldwide manufacturing operations.

As at June 30, the company had cash and cash equivalents of $23.3 million and no borrowings. A portion of the cash pile will be used for the payment of the final and special dividends. “The cash balance will also be used to finance our working capital requirements and capital expenditure in the new financial year,” Borch tells <i>The Edge Singapore </i>via email.

Micro-Mechanics has gained 76.9% so far this year to close at $1.53 on Sept 12. That translates into an indicated dividend yield of 4.6% and an earnings multiple of 14.4 times. The stock will go ex-dividend on Nov 3.

Micro-Mechanics designs and manufactures consumable tools and parts used in the machines that assemble and test semiconductors. The consumables are mainly focused on the die-attach and wire-bonding processes, with precision requirements of up to nano level. The company is also involved in contract manufacturing for high-precision parts and tools used in process-critical applications for wafer fabrication and other high technology industries.

The company seems to be on course to do well. According to research and advisory firm Gartner, worldwide semiconductor capital spending is projected to grow 10.2% to US$77.7 billion ($104.6 billion) this year. The growth rate is up from the previous quarter’s forecast of 1.4%, owing to continued aggressive investment in memory and leading-edge logic, which is driving spending in wafer-level equipment.

In anticipation of growth ahead, Micro-Mechanics says it is currently evaluating its capital expenditure requirements for FY2018. Its focus will be on further improving the level of automation in its factories and the speed of its product delivery to customers. The company is expected to announce its estimated capex budget in 1QFY2018.

Micro-Mechanics still has room to ramp up production as it was using only 62% of its capacity in 4QFY2017. This figure covers equipment in five factories located across Singapore, Malaysia, China, the Philippines and the US, and includes supporting machines that were only 10% utilised during the quarter. “As we view cycle time as one of the group’s key competitive advantages, we always ensure there is sufficient buffer for us to fulfil our customers’ orders for semiconductor tools within a target time frame of six to eight days,” the company says.

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