Micro-Mechanics (Holdings) Ltd: Semiconductor Equipment Supplier Poised for Growth
FPA Financial Corporation Pte Ltd | 14 March 2025
Micro-Mechanics (Holdings) Ltd: Semiconductor Equipment Supplier Poised for Growth
Company Overview
Micro-Mechanics (Holdings) Ltd (MMH) is a Singapore-based company that designs, manufactures, and markets high-precision tools and parts used in the assembly and wafer fabrication processes of the semiconductor industry. With five operating facilities across Singapore, Malaysia, China, the Philippines, and the U.S., MMH serves over 600 customers globally.
MMH’s business is divided into two main segments:
Consumable Tools: Produces tools and parts used for the assembly and testing of semiconductor chips.
Wafer Fabrication Equipment (WFE) Parts: Manufactures precision parts for wafer fabrication equipment.
Financial Performance
| Year ended 30 June |
2023 Actual |
2024 Actual |
2025 Forecast |
2026 Forecast |
| Revenue (S\$ million) |
67.0 |
57.9 |
64.8 |
72.5 |
| Earnings (S\$ million) |
9.8 |
8.0 |
11.4 |
12.4 |
| EPS (cents) |
7.03 |
5.78 |
8.21 |
8.95 |
| P/E (x) |
22.6 |
27.5 |
19.4 |
17.8 |
| DPS (cents) |
9.00 |
6.00 |
7.00 |
9.00 |
| Dividend Yield (%) |
5.66% |
3.77% |
4.40% |
5.66% |
| NAV per share (cents) |
33.40 |
33.14 |
34.76 |
N/A |
| P/B (x) |
4.76 |
4.80 |
4.57 |
N/A |
1H FY2025 Financial Highlights
Revenue rose 10.8% to S$32.5 million, in line with a 6.5% increase in silicon wafer shipments.
Gross profit increased 14.6% to S$16.0 million, with gross margin improving from 47.5% to 49.1%.
Profit after tax surged 46.6% to S$6.0 million, leading to a 46.6% jump in Earnings per Share (EPS) to 4.34 cents.
Dividend per Share (DPS) remained unchanged at 3.00 cents, representing a payout ratio of 69.2%.
Outlook and Projections
Revenue is expected to rise to S$64.8 million in FY2025 and S$72.5 million in FY2026, driven by growth in both the Consumable Tools and WFE Parts segments.
Earnings are projected to reach S$11.4 million in FY2025 and S$12.4 million in FY2026, translating to EPS of 8.21 cents and 8.95 cents, respectively.
Dividends are forecasted to increase to 7.00 cents per share in FY2025 and 9.00 cents per share in FY2026.
Peer Comparison
MMH is currently trading at a P/E of 22.2x, which is higher than the peer average of 21.7x. However, its dividend yield of 3.77% is more attractive than the peer average of 3.37%.
By averaging the target prices based on P/E multiple and dividend yield, we derive an overall target price of S$1.67, which implies an upside potential of 4.8% from the current share price of S$1.59.
Potential Catalysts
Advancement of Semiconductor Nodes: As semiconductor nodes become increasingly advanced, MMH’s ability to keep pace with the market’s stringent requirements could drive growth in its U.S. facility and improve profitability.
Higher-than-Projected Dividend Increases: If MMH chooses to declare dividends higher than our projections, it could provide an additional boost to the share price.
Risks to Target Price
Escalation of Trade Restrictions: Tighter export controls on semiconductor equipment and parts could negatively impact MMH’s revenue, especially from the U.S. and China markets.
Global Economic Slowdown: A slowdown in global growth, particularly in the U.S. and China, could weigh on semiconductor demand and MMH’s financial performance.
Conclusion
MMH is well-positioned to benefit from the growth in the semiconductor industry, with a diversified customer base and exposure to both the Consumable Tools and WFE Parts segments. While the limited upside potential based on current valuation metrics may justify a “Hold” recommendation, the company’s strong fundamentals and potential catalysts make it an attractive long-term investment option for investors in the semiconductor equipment space.
