Attended my first Micro-Mechanics (MM) AGM today. I was 10 minutes late into the virtual meeting but think I did not miss much. Will highlight some of the things that strike a chord with me. The presentation slides are already available on their IR site.
Large Growing Industry
Caught the last phrase from the CEO’s address that MM is a larger growing industry. So I interpret it that the addressable market is huge and MM will definitely benefit from it.
Back to Normal? Nope, Back to Better
It’s heartening and powerful to hear that operation wise, production level is back to previous level but the company wants to become even better after the pandemic.
Strong GPM, NPM, ROE and Balance Sheet
The strategies are put in place for companies to achieve strong GPM of 53.4%, NPM of 22.8% and ROE of 25.3%. CFO pointed out that these are good numbers compared to the industry. He highlighted that MM has internal target of more than 50% for GPM. And consistently achieving beyond that reflects company’s competitiveness and productivity. In an earlier presentation, COO also highlight that the company constantly think on how to value add to customer resulted in strong GPM.
Sustainable Dividend and Shareholders Friendly
CFO shared that the company has always reward shareholders when company does well. The strong cash generated allows the company to pay beyond their earning. The company also decided to increase the dividend as they know some shareholders depends on the dividend as a form of income. He shared that in 2009, a year after the crisis, the payout ratio was a whooping 500% and the company continues to do well after that.
USA Operation (MMUS)
Nothing was mentioned about the customer qualification during the AGM. However, there is much discussion provided in the management’s responses to the shareholders’ questions.
TLDR, basically they do not have a practice of providing forecast or guidance. They shared that MMUS began receiving various initial orders and has commenced production and delivery in 1Q21.
I am happy with what I heard from the AGM and what I read from their responses to the questions raised. I have bought MM for its growing dividend and looking at its record cashflow for 1Q21, I am confident that they will hand out similar or even more dividend for this financial year.
As I have hit my CPF investment limit and it is already the second highest position in my portfolio, I am not going to add more. I will just hold on to my current stake to participate in its growth.