Micro-Mechanics Holdings (SGX: 5DD), or MMH, started FY27 with a bang as revenue jumped 45% year-on-year (YOY) to S$24.2 million and net profit more than doubled to S$6.4 million over the same period.
I certainly anticipated continued momentum from last quarter, but the robust double-digit sequential jump for both revenue (+12.2%) and net profit (+21.6%) over the previous quarter exceeded my expectations.
What is even more impressive is the 300 basis points gain in its gross profit margin (GPM) this quarter to 55%—a strong indication of expanding operating leverage and operational excellence.
Benefitting from Broad-based Demand
The strong performance was broad-based, driven by growth across both business segments:
- Consumable Tools: Revenue rose 33.7% YOY to S$18.4 million. Because these tools wear down with daily chip packaging and testing, this surge confirms that plants worldwide are physically running higher production volumes.
- Build-to-Print: Revenue surged 97.5% YOY to S$5.9 million. This segment supplies capital equipment makers, signalling that chip manufacturers are not only running existing production lines harder but are actively buying new equipment.
What makes this recovery even more compelling is that top-line growth was delivered across all key geographical markets.
Crucially, with over 600 active customers and no single client contributing more than 10% of group revenue, Micro-Mechanics’ top-line expansion serves as a strong indicator that the global semiconductor industry is firmly in an upcycle.
Mid-Term Strategic Goal: Outlook, CapEx, and Dividends
When its FY26 results were released, management unveiled a mid-term strategic goal: reaching at least S$150 million in revenue by FY31, while maintaining a gross profit margin (GPM) above 50% and keeping overhead costs below 20% of revenue.
Based on this quarter’s performance, management’s target appears to be on the conservative side.
At the current operating momentum, it is not difficult to imagine MMH hitting S$100 million in revenue by the end of this financial year, with gross margins comfortably clearing the 50% threshold.
However, what stood out most to me was a comment CEO Kyle Borch shared after the AGM: beyond hitting specific headline numbers, what matters far more is the long-term direction in which the company is heading.
It served as a great reminder of a concept I often write about when discussing iFAST’s (SGX:AIY) 5-year goal of hitting S$100 billion in AUA—whether a company hits its target exact-to-the-dollar on schedule is secondary.
What is clear and undeniable is that Micro-Mechanics will emerge as a significantly larger, more capable business over the coming cycle.
Deploying CapEx to Build Capability and Capacity
Management provided additional color on how they plan to utilise their projected S$12 million CapEx budget this year. However, as seen in the slide above, the breakdown remains stated in fairly general terms.
While management likely has commercial considerations for keeping specific details close to their chest, I hope shareholder feedback encourages them to share a bit more granularity moving forward so investors can better appreciate these operational developments.
Dividends Set to Increase Naturally
Some shareholders are still adjusting to the lower payout levels relative to historical highs. Yet, given the current surge in semiconductor demand, reallocating capital toward growth initiatives makes absolute strategic sense.
What makes this transition particularly interesting is MMH’s baseline policy of paying out at least 40% of net earnings.
With earnings per share (EPS) reaching S$0.0462 in Q1FY27, there is a strong probability that full-year EPS could reach around S$0.20.
Under this trajectory, annual dividends could naturally recover from recent levels of S$0.06 per share toward S$0.08 per share as early as this fiscal year.
Holding Position to Participate in the Upcycle
Given the broad-based recovery taking place across both back-end packaging and front-end equipment segments, I remain firmly in the camp that we are still in the early stages of this semiconductor cycle.
That said, with semiconductor-related equities already accounting for a substantial portion of my portfolio (>20%), I do not plan to expand my position further.
Instead, I will hold my current stake and participate in the upcycle as the operational turnaround unfolds.
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