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Micro-Mechanics: Likely to outperform industry growth
Summary: Micro-Mechanics Holdings (MMH) had recently delivered a good set of 1QFY11 results. Looking into 2011, we believe the group is likely to continue its growth momentum, thanks to its various business initiatives in place. Among these, we note, is its expansion plans in China to capture the ongoing shift in chip manufacturing to the PRC. In its Custom Machining & Assembly (CMA) segment, we also note that MMH has been making headways, such as the ‘strategic supplier’ agreement to supply mechanical parts and assemblies for a US corporation. This bodes well for the group, as it suggests that the worst is likely over, and that the segment is now on track for growth. While the semiconductor industry growth is widely expected to moderate in the coming year, we still see a lot of potential in the group to expand its market position and product offerings, and to sustain its growth profile. We also like its strong financial position, excellent management and attractive dividend yield. As such, we maintain our BUY rating and fair value of S$0.58 on MMH, still based on 12x FY11F EPS. (Kevin Tan)
/ocbc ir/
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Westcomb starts Micro-Mechanics at Hold with $0.71 target. Says maker of precision tools used for testing semiconductors currently trading at "quite expensive" valuations vs other tech stocks, despite its small market cap. But notes fundamentals sound, with stable recurring income given constant need in industry to replace consumable parts due to wear-and-tear. Expects margins to remain high at around 60% as raw material cost "insignificant" to total cost of sales. Adds company consistent in rewarding shareholders with dividends; tips yield of 7.1% for FY09.
Is it a good buy since the divident are high?