Tuesday, January 13, 2015

About MMSV ... Turnaround Story !!!

It designs and manufactures industrial automation as well as precision die sets, jigs and fixtures for the LED and semiconductor production industries.

Its past financial performance has been erratic with losses in 2008, 2009 and 2012. However it appears to have turned the tide since 2013. The company attributes the turnaround to the switch in focus from producing semiconductor material test handlers to customized LED test equipment.

Revenue declined from rm25.7 million in 2010 to rm16.3 million in 2012 before recovering to rm26.7 million in 2013 due to increased orders for custom made machinery in the LED sector.

Growth momentum appears strong from 2014, with half revenue of rm16.5 million already making up 66.7% of the full year revenue in 2013. That translated to stronger net profit of rm4 million for 1HFY2014, amounting to 80% of 2013’s full year profit of rm5 million.

For 1HFY2014 revenue jumped 40% to rm16.5 million while net profit almost doubled from rm2.1 million to rm4.0 million. However it is also worth nothing that in the same period, trade receivables almost tripled to rm12.6 million outpacing a 1.5 times increase in trade payables to rm5.4 million.

At rm0.60 it is trading at 3.9 times its book value of 15.3 sen per share with trailing 12 month PER of 14 times. Its ROE and ROA were high at 32.9% and 32% respectively.

It is liked for its strong CAGR of 32% over FY2013 to FY2016, its net cash position and superior margins of above 24% and high ROE of above 28%.

Its cash on hand has been building since 2010 totaling rm10.1 million as at end 2QFY2014. This translates to rm0.062 per share. It has zero borrowings and is light on assets except for a 55000 ft factory in Penang.

With the company turning around, investors will be keen to see how it plans to grow the business and use its rising cash pile, to either reinvest or return excess cash to shareholders.

The company improving fundamentals seem to be the direct result of a major change in strategic direction initiated three years ago (2011). In 2011, it switched from semiconductors to automation solutions for the LED lighting industry from which it now (Nov 2014) derives about 80% of its revenue.

Products offer by the group include LED testers and automated handlers, which are essential components of the lighting industry.

The LED industry will be the key earnings driver for the company in the coming years from Jan 2015….

The hike in demand will force major LED makers to expand their production capacity which bodes well for automation solution providers such as MMSV. It is believed that Philips Lumileds Lighting Co and OSRAM Licht AG are MMSV’s clients.

It plans to focus on LED manufacturing process with a view to establishing a market in high power LED production.

The company has a diversified customer base with the domestic market accounting for 39% of sales in 2013 followed by the US (35%) and Asia (26%).

Despite that, the company is still exposed to the LED industry’s environment which can be both cyclical and dependent on economic growth.

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Please note that all data given are merely blogger's opinion. It is strongly recommended that you do your own analysis and research before investing.