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Micro-Mechanics earnings Seedly

Micro-Mechanics (SGX: 5DD) Latest Results: Revenue, Net Profit and Dividend Hit New Highs

profileSudhan P

Micro-Mechanics (Holdings) Ltd (SGX: 5DD) is involved in the designing, manufacturing, and marketing of consumables and precision tools that are used in the semiconductor industry.

The company recently released its financial results for its fiscal year ended 30 June 2021 (FY2021) where there was strong revenue and net profit growth, continuing on from its stellar past performance.

Shareholders will be delighted to know that Micro-Mechanics has increased its total dividend for the year as well. 

Let’s find out more about Micro-Mechanics’ latest earnings right here.


TL;DR: Solid Business Growth From Micro-Mechanics

Here’s a summary of Micro-Mechanics’ latest earnings:

  • Revenue for FY2021 grew 14.8% year-on-year to a record S$73.7 million due to growth in the global semiconductor industry. 
  • Yearly net profit increased by 23.3% to S$18.1 million, while free cash flow grew 25% to around S$19 million. 
  • Micro-Mechanics’ total dividend rose 17% to 14.0 cents per share, up from 12.0 cents per share a year ago.
  • The company believes its total addressable market for parts and tools used in critical chip assembly and wafer-fabrication processes to be over US$500 million.

Strong Business Growth; Higher Dividend for the Year

Revenue for FY2021 rose 14.8% year-on-year to a record level of S$73.7 million, up from S$64.2 million a year ago. 

The company has benefited from the resilient global semiconductor industry, which continued to show steady growth amid economic headwinds from the pandemic. 

The majority of Micro-Mechanics’ market saw double-digit growth, with the exception of the Philippines, Japan, and Taiwan. 

China, the company’s largest geographical market, saw a 22% increase in sales to S$23.1 million. 

Sales for the Singapore market surged 33% to S$7.2 million. 

Total sales also rose on a quarterly basis, growing 16.9% from S$16.4 million in the fourth quarter of 2020. 

With a slower increase in the cost of sales, Micro-Mechanics’ gross profit margin for FY2021 improved to 54.3% from 53.4% a year back. 

Meanwhile, Micro-Mechanics’ FY2021 net profit increased by 23.3% to a record S$18.1 million, up from S$14.7 million a year back. 

Its net profit margin for the year stood at 24.5%, up from 22.8% a year earlier. 

Micro-Mechanics’ gross and net profit margins are high in my books and show that the company has competitive advantages over its peers. 

For the quarter, the company’s earnings grew 21.4% to S$4.8 million. 

Micro-Mechanics has proposed a final dividend of 6.0 Singapore cents per share and a special dividend of 2.0 cents per share for the 2021 fourth-quarter. 

Exactly a year ago, the company dished out a final dividend of 5.0 Singapore cents per share and a special dividend of 2.0 cents per share. 

For FY2021, the company’s total dividend rose to 14.0 Singapore cents per share, up 17% from 12.0 cents per share. 

Strong Balance Sheet

Micro-Mechanics balance sheet remains rock-solid.

As of 31 December 2020, it had S$20.6 million in cash and cash equivalents with no bank borrowings. 

Operating cash flow for the year also improved, increasing 36.7% year-on-year, from S$18.8 million to S$25.7 million.

With a capital expenditure of S$6.8 million in FY2021, free cash flow grew 25.4%, from S$15.1 million to S$18.9 million.

Free cash flow is money that Micro-Mechanics can use to reinvest into its own business, acquire other businesses, pay dividends to its shareholders, or buy back its own shares. 

For FY2022, Micro-Mechanics said it expects to incur a capital expenditure of around S$6 million.

As for its return on equity (ROE), the metric grew to a healthy 31.2% in FY2021, up from 25.3% last year. 

The increasing ROE shows that Micro-Mechanics’ management is doing an excellent job in using shareholders’ capital to grow its business. 

Solid Growth Prospects 

The World Semiconductor Trade Statistics (WSTS) expects global semiconductors sales for 2021 to grow by 19.7% to US$527 billion, compared to its previous projection of US$488 billion made in March 2021.

Over the longer term, global chip sales could double to nearly US$1 trillion by 2030 from about US$450 billion in 2020, according to VLSI Research. 

The semiconductor industry is indeed set for a prolonged period of strong growth as chips become increasingly relevant in nearly every aspect of our lives. 

Micro-Mechanics forecasts its total addressable market for its business to be over US$500 million. With revenue of around US$55 million in FY2021, the company has plenty of opportunities to grow its business. 

At Micro-Mechanics’ share price of S$3.27, it has a price-to-earnings (P/E) ratio of 25x and a dividend yield of 4.3% (including special dividend).

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Disclaimer: The information provided by Seedly serves as an educational piece and is not intended to be personalised investment advice. ​Readers should always do their own due diligence and consider their financial goals before investing in any stock. The writer owns shares in Micro-Mechanics. 

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About Sudhan P
It isn't fair competition when only one company in the world makes Monopoly. But I love investing in monopolies. Before joining the Seedly hood, I had the chance to co-author a Singapore-themed investment book – "Invest Lah! The Average Joe's Guide To Investing" – and work at The Motley Fool Singapore as an analyst.
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