While Nvidia Corporation’s (NASDAQ: NVDA) earnings took centre stage on Thursday, my attention was on two companies that are in my own portfolio: Micro-Mechanics Holdings (SGX: 5DD), or MMH, and Veeva Systems (NYSE: VEEV).
I’m pleased to share that both companies continued their positive momentum and delivered a strong set of numbers for the last quarter.
In this post, I will be sharing my takeaway from the Micro-Mechanics results and management’s briefing. I will then follow up with a post on Veeva, together with Ulta Beauty (NASDAQ: ULTA), next week.
Do note that I had some problem hearing some of the management’s replies due to the background noise in the Zoom call, so take my notes with a pinch of salt.
Wafer Fab Equipment Segment Turns Profitable
After recording two years of decreasing sales and profits, MMH reported a 12.6% a year-on-year (YOY) growth in revenue to S$65.2 million for the fiscal year 2025 (FY 2025). Subsequently, its net profit also jumped by 54.2% to S$12.4 million for the same period.
While both its segments of Consumable Tools and Wafer Fabrication Equipment Parts (WFE) showed improvement in performance, it’s clear that the WFE segment is the star player this year, with sales jumping 45.5% YOY.
Combined with the successful restructuring effort of MMUS (primarily deals with WFE) in the previous year, it reverses the losses in recent years and made an operating profit of S$1.2 million.
The results are certainly encouraging, but they naturally bring up the question of whether this newfound momentum can be maintained.
The strong performance in the fourth quarter of fiscal 2025 suggests the upturn is durable. There are also indications pointing to potential growth in the coming years.
Decentralised Factories Stand to Benefit from Current Climate
Ongoing geopolitical tensions and macroeconomic volatility have no doubt created business uncertainties. Interestingly though, MMH’s decentralised factories could potentially benefit from this turmoil.
The group continues to see US players actively building out domestic advanced packaging capabilities. This presents new opportunities for MMUS as it is well-positioned to work with existing customers to expand their presence within the US.
The localisation of production also allows MMH to respond quickly to customer requests. CEO Kyle Borch shared that in some instances, MMH has been able to develop a product in just seven days.
Responding to a question about their Suzhou factory, CEO Kyle noted that China’s inward turn has increased domestic demand, but he also acknowledged that the China market is one of the most competitive.
Despite this, MMH is not currently seeing any behavioural shifts from its customers.
He believes customers are still drawn to MMH, even though it may not be the cheapest option, because the company is able to supply them with consistently high-quality products and services in a timely manner.
Cash Management: Positioning for Opportunities
MMH’s management believes there will be ample opportunities for the group to grow in the next five years.
To capitalise on any emerging opportunities, they have decided to maintain a higher cash balance, even though plans are still on the drawing board. This strategic choice is why the final dividend per share was maintained at S$0.03, despite the surge in profits.
Honestly, I was disappointed at first, as based on past performance, I had expected a higher final dividend per share. This also meant my hope of surpassing last year’s record of collected dividends was dashed!
Executive Chairman and previous CEO, Christopher Borch, weighed in on this, explaining that the new team would have a slightly different approach to managing cash. Their goal is to sustain the company’s growth and create long-term, sustainable value for shareholders.
The non-increase in the final dividend could also be a reason for the share price drop of 4.3% yesterday to S$1.78.
This is yet another reminder of why it’s necessary to project a dividend income that is at least 1.5 times your expected spending if you want to retire early with just dividends.
That said, assuming MMH continues to pay out S$0.06 of annual dividends per share, it’s still a decent yield of around 3.4%. This is especially so if MMH can continue to level up its game in supporting the Wafer Fab industry, leading to greater future growth.
It didn’t take long for me to overcome my disappointment.
A growing company today can deliver higher dividends tomorrow, and MMH’s strategic focus on reinvesting for the future reinforces my long-term conviction.
I will continue to hold my shares, as I remain confident of MMH’s potential.
Help Me Raise Funds for Autism Resource Centre (SG)
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A little background on this challenge.
ARC(S) is building and expanding services to support adults with Autism Spectrum Disorder (ASD), addressing their growing needs in areas such as employment, lifelong learning, independent living training, and residential housing.
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