Micro-Mechanics (Holdings) Ltd. Annual Report 2024: Strategic Resilience Amid Industry Challenges

1. Report Details

Financial Year: FY2024 (July 1, 2023 – June 30, 2024).
Date of Report: The report was completed as part of the annual report issued in 2024.

2. Company Overview

Micro-Mechanics is a key supplier of high-precision tools and parts for the semiconductor industry. It provides solutions across design, manufacturing, and contract production for semiconductor processes.
The company operates through facilities in Singapore, Malaysia, China, the Philippines, and the USA.

3. Financial Highlights

Revenue: S$57.9 million, a decrease of 13.6% from the previous year.
Net Profit: S$8.0 million, down from S$9.8 million in FY2023.
Earnings Per Share (EPS): 5.78 cents, decreased from 7.03 cents in the previous year.
Gross Profit Margin: Improved to 47.0% from 46.5% in FY2023.
Net Profit Margin: 13.9%, a slight decline from 14.6% in FY2023.
Return on Equity: 17.4%, down from 21.0% in the previous year.
Total Assets: S$56.9 million, with cash reserves of S$16.6 million and no bank borrowings.

4. Dividend Policy

The company maintains a dividend policy to distribute at least 40% of after-tax annual earnings.
Dividends for FY2024: The Board proposes a final dividend of 3.0 cents per share, totaling 6.0 cents per share for the year. This represents a total payout of S$8.3 million, a payout ratio of 104%.
Dividend Payment Dates: Final dividend, if approved at the Annual General Meeting on October 30, 2024, will be paid on November 18, 2024.

5. Key Business Activities and Initiatives

Five-Star Factory Initiative: Launched to enhance operational agility, manufacturing excellence, and competitiveness across five facilities in the US and Asia. It aims to maximize performance, innovation, safety, and efficiency.
Cost Control and Efficiency: Focus on higher-value work, disciplined cost management, and operational excellence to reduce the impact of market fluctuations. This approach resulted in an improved gross profit margin despite lower revenue.
Restructuring of the USA Subsidiary (MMUS): Strategic recalibration of the engineering and product mix, optimizing costs to return the US subsidiary to profitability in FY2025.

6. Industry Outlook

The semiconductor industry shows signs of recovery, with expectations of global semiconductor sales reaching its 2022 peak by the end of 2024.

7. Sustainability Initiatives

Micro-Mechanics remains committed to environmental, social, and governance (ESG) practices. Efforts include reducing greenhouse gas emissions, energy consumption, water conservation, and waste management.

8. Investor Recommendations

For Existing Shareholders: The company has demonstrated resilience and a commitment to returning value to shareholders despite industry downturns. With the proposed final dividend and ongoing initiatives to return the US subsidiary to profitability, holding the stock may offer stable long-term returns.
For Potential Investors: Given the company’s financial discipline, continued focus on innovation, and participation in an industry poised for recovery, investing in this stock could be considered for long-term growth prospects. However, market conditions and semiconductor demand should be closely monitored.

Special Notes for Investors

The company has shown a solid dividend history and commitment to financial prudence. It maintains a strong balance sheet with zero bank borrowings.
Risks: The semiconductor industry’s cyclicality and global economic uncertainties could impact future performance.

Disclaimer

The above recommendation is based solely on the information contained in the provided annual report for FY2024. Investors are advised to conduct further research and consult a financial advisor before making investment decisions.