(Nov 4): Electrical and electronic component manufacturers listed on the Singapore Exchange are benefiting from what some market watchers are calling a semiconductor supercycle, which has already propelled earnings at technology giants such as Samsung Electronics Co to new highs. Counters such as Micro-Mechanics (Holdings), Tai Sin Electric, Venture Corp, Memtech International and Spindex Industries have paid steady or even growing dividends in recent years. For instance, Spindex paid three cents a share for FY2017 ended June, its highest payout since going public.
Precision tool maker Micro-Mechanics trades ex-dividend on Nov 3. It will pay a special dividend of one cent a share and a final dividend of four cents a share on Nov 17. Together with an interim dividend of three cents, Micro- Mechanics would have paid more dividends this year than any year in the last decade. Shares in Micro-Mechanics have soared 145% since the beginning of this year on the back of this optimism. The company is trading at 17.7 times earnings and has a yield of 3.8%, based on the closing price of $2.11 on Oct 31. Micro-Mechanics produces tools used in the manufacture of semiconductor products, such as rubber tips that are used to pick up tiny semiconductors. It has five plants across Asia and the US, serving major customers such as Samsung, Bosch and Intel.
Revenue has grown threefold since 2003, according to Phillip Securities. Over the last five years, the company’s average gross margin has been over 55%. In 2009, during the financial crisis, its gross margin was still above 40%. In fact, Phillip estimates Micro-Mechanics has the highest gross margins among global peers because of its intellectual property rights in material science. It has a “buy” call on the stock, with a price target of $2.50, which is based on the back-end semiconductor sector’s valuations.