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Micro-Mechanics AGM: Green Shoots Emerging

SGX Market Strategist, Equity & Fixed Income, Singapore Exchange Ltd (SGX)

Geoff Howie

SGX Market Strategist, Equity & Fixed Income

Equity Bottom-Up

Micro Mechanics (Holdings) / Equity Bottom-Up

<p><em><strong>Non- SGX Report: These equity research reports are not written by the SGX</strong>.&nbsp;SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.</em></p>
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<h2>Micro-Mechanics Holdings Ltd</h2>
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<h3>Watch for headwinds</h3>
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<p>Investment Thesis:</p>
<p>Downgrade to HOLD with TP of S$3.42. Despite 9M22 revenue increasing by 10.8% y-o-y, the group witnessed 3Q22 revenue decline by 3% q-o-q due to lower sales from the China market as a result of the government’s movement control measures. Furthermore, MMH’s US operations have also witnessed impacts due to raw material supply constraints. We trimmed FY22/23F earnings forecasts by 12%/15% in lieu of (i) a potential slowdown in sales from the US and China markets and (ii) lower margins amid rising raw material prices and higher effective taxes.</p>
<p>Semiconductor industry outlook remains healthy. The semiconductor industry is expected to grow c.9% in 2022 and see a CAGR of 8% in 2020-2025, led by drivers such as Internet of Things (“IoT”), 5G, and automotive demand. WSTS is projecting the global semiconductor market to grow by another c.10% in 2022.</p>
<p>Consumable nature of products contributes towards greater resiliency to industry swings. Consumable nature of MMH’s back-end tools and front-end equipment parts supports regular demand across the cycle. In most downturn periods, MMH’s revenue was observed to be relatively less impacted than its peers.</p>
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Non- SGX Report: These equity research reports are not written by the SGX.&nbsp;SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.



Micro-Mechanics Holdings Ltd



Watch for headwinds



Investment Thesis:
Downgrade to HOLD with TP of S$3.42. Despite 9M22 revenue increasing by 10.8% y-o-y, the group witnessed 3Q22 revenue decline by 3% q-o-q due to lower sales from the China market as a result of the government’s movement control measures. Furthermore, MMH’s US operations have also witnessed impacts due to raw material supply constraints. We trimmed FY22/23F earnings forecasts by 12%/15% in lieu of (i) a potential slowdown in sales from the US and China markets and (ii) lower margins amid rising raw material prices and higher effective taxes.
Semiconductor industry outlook remains healthy. The semiconductor industry is expected to grow c.9% in 2022 and see a CAGR of 8% in 2020-2025, led by drivers such as Internet of Things (“IoT”), 5G, and automotive demand. WSTS is projecting the global semiconductor market to grow by another c.10% in 2022.
Consumable nature of products contributes towards greater resiliency to industry swings. Consumable nature of MMH’s back-end tools and front-end equipment parts supports regular demand across the cycle. In most downturn periods, MMH’s revenue was observed to be relatively less impacted than its peers.










(Non-SGX Report) Micro-Mechanics Holdings Ltd - Watch for Headwinds