Micro-Mechanics (Holdings)

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Good morning, valuebuddies,

Since 8th Feb 2020, I guessed all of you already gotten the 5 cents dividend on week 28 Feb?

Lets catch up on 3 Micro-Mechanics announcements then.

A) 19 Mar 2020 Update on operations in Malaysia and USA
(click to read details)
Basically, on 16/3/2020, Malaysian government announced Movement Control Order (MCO) nationwide starting on 18/3/2020.
Micro-mechanics continue operating with minimum personnel because it's part of
“List of Products that are Part of the Supply Chain of Essential Goods Supply Chain for Exemption from the Restriction of Movement”.

Similarly, USA California announced a legal order to shelter at home starting on 17/3/2020.
Micro-mechanics continue operating with minimum personnel because it's part of essential services aka under an exemption in the order.

The same announcement also mentioned that Singapore, the Philippines and China is fully operational.

B) 17 Apr 2020 Update on operations in Singapore
(click to read details)
On 3/4/2020,  Singapore government announced Circuit Breaker (CB) nationwide.
Micro-mechanics continue operating with minimum personnel because it's part of essential services too.

C) 2Q20 Quarterly Result end 30 Mar 2020 will be announced on 24 Apr 2020 
(click to read details)
Micro-mechanics choose to continue reporting quarterly result.
Valuebuddies might want to set an alarm to check out MM's result on next Friday after lunch.

Stay save and have fun investing, everyone.

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24 Apr 2020 As expected, Micro-Mechanics released it's 3Q20 result including Jan - Mar 2020 during C19 lock down of China cities too.
https://links.sgx.com/FileOpen/MMH-SGXne...eID=607894
(click to read 3Q20 results)

I expect hard working valuebuddies to click and read the report and will leave it as it is.

However, what Chris says about MM culture and how it had and will continue to brave the brand new world is a very good info to share.

Enjoy.
CEO of Micro-Mechanics, Mr Chris Borch said, “Amid the unprecedented market and operating conditions caused by the Covid-19 outbreak, the Group still performed admirably well in 3Q20.

Dealing with the repercussions of a global pandemic is something new for the Group. But we have always been mindful of the need to build an organization that is strong, flexible and resilient. 
This can be achieved by having goals, structures and processes that enable us to quickly adjust to changing circumstances and ensure business continuity. 
To this end, we will continue focusing on a handful of key initiatives which includes the maintenance of a healthy gross profit margin, control of overhead expenses, automation of our operations, excellence in corporate transparency & governance, delivering steady profitable growth without debt, and
building a track record for consistently rewarding shareholders.

Heading into the final quarter of our financial year, it is difficult to accurately assess the impact of the Covid19 pandemic on our business. With the world economy in turmoil and near shutdowns of whole industries, business in the short term will be challenging. 
Nonetheless, we continue to believe the semiconductor industry is poised for a prolonged period of solid growth.
When the pandemic is over, our goal is not to hope for life and business to just go back to normal. Instead, we want to absorb what we have learned, implement more fully some of the changes we made to adapt to
changing circumstances, and better anticipate the challenges that lie ahead. In short, we see an incredible opportunity to go back to better.”

Stay home and stay safe, everybody.

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After MM released its Q3 result on 24 Apr 2020, 
our favorite Analyst Paul Chew published a research report:
"Stellar performance despite the disruptions".
(click to read)

Immediately, Clement Ho published an initiation report:
"Semiconductor consumables specialist - A proxy to 5G digital revolution".
(click to read)

Let me chip in too.
1. Micro-Mechanics is never cheap.
Even when I started buying at 40+cents, its PE/PB was already above valuebuddies definition of undervalue.
Fast forward to last Friday closing price of $1.65, its PE/PB is still holding up stubbornly.

2. Micro-Mechanics does not have IP/Patents aka visible moat.
Valuebuddies had been searching for evident on how and why MM could commands a premium against it's competitor.
I mean, it is mentioned everywhere that MM does not have a direct Global competitors.
How could it be? 
A small listed semiconductor company dealing with precision engineering Headquarter in Singapore does not have a global direct competitor?
Unimaginable.
Put it this way.
MM manufactured products are of low value and easily substituted by competition that faces low barriers to entry.
The raw materials were cheap and easily available: rubbers and aluminium!

While searching for MM's moat, at this moment, valuebuddies can only glare at its financial result with awk:
Solid long term net profit CAGR of 15.6% since FY02

3. Micro-Mechanics is lucky to find a niche in the cyclical semicon industry.
CEO is the captain of the ship.  
Chris came to Singapore at the point in time that USA is shifting it's semicon manufacturing to Asia.
He settle down and founded Micro-Mechanics in 1983 (Chris previously from Kulicke & Soffa).
COO Low Ming Wah joined in 1989 as its first engineer (previously from GE and Siemens).
Currently Low is the chairman of SPETA Singapore Precision Engineering & Technology Association and board member of Enterprise Singapore.
CFO Chow Kam Wing joined in 1996 to launch IPO in 2003 and expanded its footprint to the regional countries.
Currently, Chow is the committee member of ISCA and CFO Committee of Australia CPA(Singapore) too.
Their motto is simple:
"People Make Everything Happen!"
Their mission is simply: 
"Our mission is to provide our customers with “Perfect Parts and Tools, On Time, Every Time”, based on scalable, repeatable and cost-effective manufacturing processes."

As a customer, you can feel that the entire company is build to align to your business interest!
The entire company will innovate and co-create products that meet your operational challenges.
The best part is at a cost that make sense to you.
You can count on Micro-Mechanics constantly doing the right things for you.

With this in mind, do take a closer look at Micro-Mechanics and learn about a company that build to last.
<vested - core>

Stay home and stay safe, everyone.
Watch Jamie Dimon: Address to HBS MBA Class 2009

[amperex]

In UOB KayHian initiation coverage, it said ' we conservatively assume a temporary suspension of dividend payments for 2HFY20 in view of the worsening COVID-19 situation.'

I don't think MM will suspend dividend payments for 2HFY20. Currently they have about $16 mio in cash and they will likely have $19.5 mio or more by end June 2020. That's about 14 cents per share. They can easily pay 5 cents per share for this year end. But they may choose not to pay their usual special dividend of 1 cent this year.

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I agree with you.
Secretly, I hope to get the 1cents special dividend thou.

In case MM decided to keep cash aka not payout any dividend, so be it.
The cash likely will put into good use after C19.

If you bother to read what Chris says in the last announcement, see my post above.
MM wanted to learn from this Pandemic and then use their learning to improve their operation process and turn up to be a better company.

Chris: We see an incredible opportunity to go back to better.

In any case, I had been buying Micro-Mechanics.
As what our valuebuddy says, if you like to each Hamburger, do you want the price to go up?

Stay home, stay safe, everyone.
Stock Discussed:
Amazon (AMZN): 7:23 Minute Mark
Tencent Holdings (700:HK): 33:00 Minute Mark
Micro-Mechanics (SGX:5DD): 53:41 Minute Mark

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31 May 2020 DO IT RIGHT - Nine Guiding Statements for Going About Our Daily Work

1. Do it with Diligence:
Working with care and conscientiousness to understand and meet the requirements of our customer is key.  Because a single defect can cause disastrous consequences, our customers expect Micro-Mechanics to deliver parts and tools of flawless quality.  Together with ever-rising demand for fast, cost effective and salable manufacturing, we think there may eventually be only a handful of suppliers capable of meeting these stringent requirements.  Although every stakeholder and doing right by our customers would be the right thing to do in most, if not all situations.

2. Do it with Ownership:
Everyone is responsible for his or her actions.  Covering up a mistake, not taking responsibility for an issue or blaming others without justification can damage working relationships, cause loss of trust or even foster unhealthy politics.  None of these are helpful to problem-solving or making progress and may even result in damage to one's reputation or that of the Company's, that is beyond repair.  In the end, being responsible and developing an ownership mentality is the right approach because it fosters learning, growing, professionalism and progress.

3. Do it with Integrity:
It is everyone's job to safeguard the company's assets, avoid conflict of interest, use our working time properly and ensure that Company's records are complete, accurate and timely.  If you suspect or observe a lack of integrity, especially when it comes to financial records, or the misuse of Company property, you should immediately report these concerns.  We are especially concerned with gifts, entertainment, the giving of bribes or other inducements that distort and deviate decision-making away from merit and performance.  Our handbook prohibits retribution by a colleague, supervisor or by management.  Our handbook also spells out a Whistle-Blower process which allows any person to directly contact an independent member of the Company's Board of Directors.  Being honest, sticking to what is right and acting conscientiously may not always be easy but it is always the right thing to do.

4. Do it with Teamwork:
In our fast-moving and complex world, it takes groups of people working together to compete a challenging tast or a major project in an effective and efficient way.  While individual contributions are still incredibly important and recognized, it takes collaboration, trust, an open mid to different viewpoints, and having everyone synchronized to a common purpose and goal to achieve excellence.  As Andrew Carnegie, one of the first great industrialist of the 20th century remarked: 
"Teamwork is the fuel that allows common people to attain uncommon results."

5. Do it with Respect:
We expect everyone at Micro-Mechanics to have due regard and be fair-minded when it comes to the background, opinions, vies, differences and rights of others.  Whether as a person or a Company, there are few things more valuable than building a reputation for truthful, open, fair, and honest working relationships with colleagues, customers, suppliers, and other stakeholders.

6. Do it with Ingenuity:
As we go about our daily work, there will alwass be some process or result that we need to make better.  Ingenuity happens when people see problems not as a roadblock or difficulty, but rather as an incredible opportunity for learning and acquiring new skills, gaining experience and especially for harnessing creativity and resourcefulness.  While not everyone can be a genius, we think it is possible for anyone to have ingenuity if we are just willing to, as Steve Jobs said,
"think different."

7. Do it with Governance:
The overall methodology for guiding what we do at Micro-Mechanics is called our system of Corporate Governance, Beginning with a Mission statement that sets out the purpose of the Company and what we hope to achieve, we have developed strategies, goals, processes, procedures, rules, regulations - and even this code of conduct - to help govern the way our people make decisions and take actions.  Although some things about governance, such as seeking formal approval for a purchase or carefully following a work instruction, may seem difficult or perhaps even unimportant, this compliance by everyone - at all levels - is critical.  Without proper compliance, we may expose the Company to costly product defects, violations, risks or other consequences that could destroy the value we have worked so hard to build for all the Company's stakeholders.  It goes without saying that good governance includes obeying all applicable laws and regulations.  A few are worthy of special note including non-disclosure of confidential information, anti-bribery, insider trading, workplace harassment and employee-privacy laws.  Good governance also means having a concern for those around us, for the communities in which we operate and for the environment.  When everyone at Micro-Mechanics strives to make decisions and take actions according to our system governance, then good results for all our stakeholders are bound to happen.

8.Do it with Habit:
When we repeat a way of thinking or doing things over and over, this pattern of behavior will become a habit as it is almost automatic.  Positive or good habits are powerful tools for improving how we work and what we get done.  For example, when we begin to see that every detail, no matter how small, is important to achieving excellent results, we are beginning to develop a habit for Paying Attention to Details. When we start to recognisze the important of collecting and analyzing data, we are on our way to have a great habit for Data-based Decision Making. Other examples of positive habits are Being Proactive, Listening Before Talking, Planning Before Doing, Taking First Things First and Acting for Mutual-Benefit.  Good habits come from repetition and practice or as the ancient philosopher Aristotle said centuries ago: 
"We are what we repeatedly do.  Excellence, then, is not act but a habit."

9. Do it with Timeliness:
The degree to which we consistently meet time-related goals is important.  Indeed, quality is no longer confined to measuring the physical dimensions or properties of a part.  Being late on a delivery or missing some other time-based commitment can be just as bad, if not worse, than a dimension that is out in X, Y or Z.  When we all work to be on time for meetings, promptly communicate with customers, suppliers and colleagues, set priorities, work to minimize distractions and strive to meet schedules, we are actually building something of even greater value - a reputation for reliability and timeliness.

Stay home and stay safe, valuebuddies.
Watch Tony Robbins:

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FY2020 Result as at 30 Jun 2020 to be release on 28 Aug 2020.
https://links.sgx.com/FileOpen/MMH-Date%...eID=628474

Try to understand MM's (potential) revenue from USA.


Wear mask and social distancing, everyone.

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FY2020 Result as at 30 Jun2020
Rev $64m (vs 60m)
GP  $34m (vs 32m)
NP  $14m (vs 12m)
Div 5 + 2 = 7cents (vs 5 +1)

During FY2020, sales at our plant in the USA (“MMUS”) increased 20.3% to S$13.6 million. 
Including depreciation expenses of S$2.3 million and engineering expenses of S$2.2 million, as well as the reduced production capacity during 4Q20 due to the COVID-19 pandemic, MMUS incurred a small loss of about S$0.1 million. 
As we move into FY2021, MMUS continues to gain traction and visibility with several key customers that are leaders in the semiconductor equipment industry. 
At the beginning of 1Q21, after a lengthy development and testing period, we received customer qualification for a family of ultra-critical parts used in the semiconductor wafer-fabrication process. 
These parts are currently being supplied to the customer by a large, publicly-held contract manufacturer. 
Because our qualification from the customer over its long-time incumbent supplier was based on the superior quality and lower cost of our products, we have never felt more positive about the prospects for our plant in the USA. 
Indeed, our team there has worked tirelessly to develop MMUS as an elite supplier for critical parts used in semiconductor wafer-fabrication. 
In the future, we believe there may only be a handful of suppliers capable of meeting the stringent specifications increasingly required by nano-level device geometries. 
https://links.sgx.com/FileOpen/MMH-SGXne...eID=629672

Stay home and stay safe, everyone.

[ksir]

Enviable result.
The Management have done a marvelous job in maintaining and also preparing for future growth.

It seems to be flowing nicely with the tide.
Kudos to Chris & his team!


Sent from my iPad using Tapatalk

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extracted from page 7 of PPT:
It remains difficult to accurately predit the business outlook
- due to changing market conditions and government measures to contain the spread of C19
BUT our view of the seminonductor industry remains unchanged, and our goal is not to just go Back to Normal, but to go Back to Better.

In the long term, our view for the future of the semiconductor industry remains unchanged, if not enhanced.
We continue to believe the industry is poised for a prolonged period of solid growth.
https://links.sgx.com/FileOpen/Micro-Mec...eID=630561

Stay home and stay safe, everyone.