+ Revenue at another high. Revenue rose 15% YoY to record S$18.7mn. Sales in China were up 28%, followed by +18% in the U.S. China’s growth reflected the industry’s pick-up in semiconductor demand while U.S. sales captured contributions from a new front-end programme that involves semiconductor parts for gas handling in a vacuum chamber. We believe these are likely vapour or chemical disposition machines.
+ Interim dividends up 20% YoY. MMH raised interim DPS by 20% to 6 cents. This was its second consecutive year of increase. Over two years, interim DPS has been raised 50%.
High barriers to entry and the ongoing surge in semiconductor demand should provide runway of growth for the next two years. Management believes the industry is entering a multi-year supercycle of growth from skyrocketing demand for data centres, video streaming, remote work, 5G and automobile electrification. High barriers to entry persist for MMH’s core rubber tip product. For instance, only a handful of suppliers can supply such high precision, customised and proprietary materials to customers.
Downgrade to NEUTRAL, albeit with higher TP of S$3.35 (from S$2.93)
Recent share-price rally has priced in its positive outlook and long-term merits such as 4% yields, 35% ROEs and a net-cash balance sheet.