+ Still a record March quarter. Revenue in Singapore grew 33% YoY and in China, 28% YoY. In contrast, there was weakness in Taiwan and the U.S. A contributor was difference in sector mix. Countries with more automobile exposure suffered from disruption in chip supply.
– Gross margins lower than expected. We had expected record revenue and increased product complexity to lift margins, mirroring its FY17-18 upcycle when margins were 57% and capacity utilisation, 60%. Current utilisation is only 56%. Capex ramp in the past few years has yet to be fully utilised.
Semiconductors’ multi-year upcycle continues. A tailwind for MMH, together with penetration of front-end semiconductor equipment, is its U.S. operations. Increased complexity of semiconductors from collapsing geometries and more advanced materials to handling wafer dies will further consolidate the supply chain and reduce current competition. MMH is embarking on its second-largest capex spending this year for further improvements in productivity and automation.
Maintain NEUTRAL with lower TP of S$3.02, from S$3.35
MMH pays attractive dividend yields of 4%, backed by net cash. Its strengths include consumable semiconductor products, high gross margins of 55% and ROEs of 32%.