A journey of thousand miles begins with a single step 千里之行,始于足下。

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Rainbow 
Follow the guru - MrFI2024
https://mrtfi2024.wordpress.com/category/micromech/

Good morning valuebuddies.
Another cold day started and once again, lots of opportunities open up in front of us.

I would like to trace an investment journey of a value investor.
By sharing his thought process in his blog, MrFI2024 had pen down the investment merit (and diverse and re-investment) of MM
Although I am not 100% in-sync with MrFI2024, I do see that his thoughts and (sometime contradicting) actions, could be useful scenario play for (potential) MM investors.
See how he found MM as a dividend stocks, diverse when MM share price increased to 7x of dividends and then brought back MM at a much higher price that he diverse.
Also, take note that this time, he is using CPF to buy MM... which is a strong indication of his conviction on MM.

Enjoy his MM journey started in 2016...

21/9/2016
For the past two months, I have made the following adjustments:
1. Added my holdings to Capital Retail China Trust, Fraser Centrepoint Trust and SIA Engineering. All these are to increase the dividend payout received from them.
2. I divested Vicom due to uncertainty in its short term business outlook.
3. I divested SGX due to lack of affinity to it.
4. I have initiated a position Micro-Mechanics as I see a constant stream of dividend from them.

12/2/2017

It has been a busy past 6 weeks. Things are finally looking to settle a bit and it’s time to continue to keep in touch with my thinking and reflection on my investment.
It has been a good start to the year for the market and my portfolio also benefited from it. Year to date, it has returned 12.8%. Woohoo, I hit my target in less than two months. So would I achieve another 40% return this year? I hope so but you never know. Who knows? The market might just turn south any time. So continue to monitor the company’s performance and invest/divest at the right time for the long term.
I have added the following positions.
Valuetronics: Increased my stake slightly for its dividend.
UMS: Bought a small stake after reading its plan to divest its customer base and attracted by its consistent dividend.
Micro-mechanics: Increased my stake after it announced its good improvement in its latest quarter. Attractive dividend and potential of further growth.
Dutech: Took a very small stake after reading Thumbtack Investor’s detailed analysis
Sing Medical: Took a very small stake as I perceived that the new management will continue to improve the group’s performance
Fraser Logistics and Industrial Trust: Took a very small stake after reading about it on The Edge and Dividend Warrior’s analysis.

24/2/2017
A few more days to the end of the month and took a few more actions after the release of various results over the past 2 weeks.
dividend yield of portfolio stands at 4.1%. My top 8 holdings in terms of initial capital outlay are:
Raffles Medical @ $1.48
Parkwaylife Reit @ $2.32
Straco @ $0.84
Best World @ $0.60
Valuetronics @ $0.56
Fraser Centrepoint Trust @ $2.01
SingTel @ $3.82
Mirco-mechanics @ $0.91

29/5/2017
All my counters have reported their performance for the period. Below is a short summary of my top 10 counters’ performances.
Micro-Mechanics reported its 20173Q results on 28 April. For the second consecutive quarters, it has improved its revenue and earning. For 9M, revenue is up by 9.0% and net profit up by 12.8%. It does seem that their strategical review last year to focus the engineering, development and investment efforts of the Group’s five factories on serving the semiconductor industry is working. Utilisation rate has gone up to 59% for Q3.
It seems that Micro-Mechanics will do well for the next few years and with its dividend policy of not less than 40%, this should continue to be a good investment.

9/6/2017
The Singapore market has done well for the first half of the year. Including dividend, STI ETF has returned about 14%. Till date, my cash portfolio has returned about 41%. The bulk of the return is contributed by the following four counters:
Best World – 143%
Valuetronics – 70%
Food Empire – 46%
Micro-Mechanics – 41%
TIME TO SELL?
Micro-Mechanics is trading at a historical PE of 14.6. Assuming net profit grow by 12% for the year (net profit grew by 23.5% in Q2 and 26.6% in Q3), PE would drop to 13.1. With the increase of its interim dividend to 3 cents in 1H, I expect similar dividend of 4 cents for the full year, which gives a dividend yield of 5.5% at current price. Definitely not overvalue.
Conclusion
While the four counters have given me very good return, their fundamentals remain sound and are not overvalue. With no new idea and I do not need cash currently, I will continue to hold on to them.

1/7/2017
Best World, Food Empire and Valuetronics were the key drivers of my first half performance. Will they continue to do well in the next few years? Will other counters take over the driver seat?

I decided to make a prediction on the above questions base on my current, limited knowledge of their business and gut feel.
Micromechanics – Continue to benefit from its strategic decision to focus on semiconductor.

15/8/2017
Micro-Mechanics reported a good quarter with another increase in dividend. However, I decided to divest it just before it announces its results. Hence, I will not update its performance.

28/8/2017
Lots of action this month. Divested a few counters but bought quite a bit with the $$$ from divestment of Best World.
Sold Mircro-mechanics at 1.41. Bought purely for its track record for dividend but its price has gone up to 7 years of dividend due to its good performance. Decided to divest it as its dividend yield dropped below 5%. Surprised me with a second rise of dividend this year and with a 8 cents dividend, yield gone up to 5.6%. On hind side, should have continued to hold on to it but actually felt pretty neutral about it. Probably am satisfied with the above expectation return from the counter.

03/11/2019
Last month, I divested Metro Holdings after holding it for 12 years. With the CPF refunded, I was looking to redeploy the fund. I do not want to invest in REIT as they already occupied 30% of my overall portfolio. I also do not want to invest in a dividend counter that I already held in my cash portfolio. Nothing wrong with that but just my personal preference. I could have buy more of VICOM and OCBC (which I might still do) but I would not deploy all the fund on them. So I was looking for a new dividend counter that I can hold for many years.

In the end, I decided to buy Micro-Mechanics. A company I am familiar with since I once held it before. The subjective me was hesitating to initiate a position at $1.85 as its price has suddenly spiked up recently from $1.6+ in early October. Also, having sold the counter at $1.41 two years ago, it does not feel good to buy back at a higher price.  The objective me argued that I should not to look at past prices and decision should be made based on current valuation and future outlook.
[Image: screenshot-2019-11-03-at-4.49.13-pm.png?w=1024]
Micro-mechanics has seen a decrease in both its revenue (-7.3%) and net profit (-24.5%) in the last financial year due to a steep cyclical downturn in the global semiconductor industry and heightened global economic and geopolitical uncertainties. Despite the lower earning, it decided to continue to maintain its 10 cents dividend. It does mean it is paying out more than its earning with a payout ratio of 110%. The higher payout ratio is not a concern though as its dividend is still lower than its free cashflow per share of about 11 cents and it has about 15.7 cents per share in cash with no debt.

Based on the numbers, it does seem that buying at $1.85 is not too expensive as the yield would be around 5.4%. I decided to wait for its announcement of its 2020 Q1 results before taking any action. I was hoping for a weaker Q1 results will soften its price. Indeed, it reported a revenue drop of 9% and net profit drop of 27%. However, its share price hardly moved on that day. This is probably due to the 6 cents dividend that will go XD next Tuesday (6 Nov) and a glimmer of hope that the down cycle is coming to an end as 2020Q1 numbers are better than 2019Q4.
[Image: screenshot-2019-11-03-at-5.19.48-pm.png?w=1024]
With this latest set of results, I finally bought the counter twice last week at an average price of $1.84. The price would probably drop after XD and I am likely to add my third (and maybe fourth) tranche in the coming months.

17/9/2020
Last August, due to the resurgent of Liverpool, I decided to form a football team of stocks.  With the oncoming reseting of my portfolio, it’s time to update the team for the new decade. Updated Team 2020.
[Image: screenshot-2019-11-16-at-11.02.10-pm.png?w=696&h=1048]
14/3/2020 
Micro-Mechanics is poised for growth this year as evidence from its Q2 revenue growth of 7.4% and net profit growth of 14.4% after several quarters of decline. However, short term outlook becomes uncertain due to Covid-19. MM surprises with an increase in its interim dividend by 1 cents to 5 cents.

I am cautiously optimistic that this is an indication of management’s confidence of the year ahead.


8/8/2020
[Image: screenshot-2020-08-29-at-4.56.41-pm.png?...&h=&zoom=2]
As expected, Micro-Mechanics announced a good set of results. Revenue and net profit are up 17.5% and 45.5% respectively. And if guidance by the world semiconductor body is correct, the demand will continue. Company recommended a 7 cents dividend. Together with the 5 cents interim dividend, that’s a 20% increase from previous year. Payout ratio is about 110% based on both earning and free cashflow, so it is dipping into its balance sheet. Not a big concern as balance sheet is robust with about 15 cents per share. Also, with its US plant receiving customer qualification for a family of ultra-critical parts used in the semiconductor wafer-fabrication process, things look bright for the coming years.

Will add when more fund is available for CPFIS.


30/10/2020
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.


7/11/2020
First team made up 70% of my portfolio which is 4% higher than the previous quarter. This is attributed to the strong performance from IFAST, Micro-Mechanics and Parkwaylife.
Micro-Mechanics reported another record quarter, with revenue up by 18.3%, net profit up by 43.2% and free cash flow up by a whooping 81.8%.
this is the best quarter over the past year and bearing unforeseen circumstances, this should continue for the rest of the year. I also came away from the recent AGM feeling positive and am confident that the company is able to at least maintain its dividend for this financial year.

Currently occupying 7.5% of my portfolio and almost reaching my CPF stock investment limit, I will just continue to hold on to my current stake.


Enjoy:



Stay home and stay safe, everyone.
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Rainbow 
Good morning, valuebuddies.
Wish everyone a great day ahead.

To me, MrFI2024 is a guru.
I love his portfolio and I love his methodology (thought process).

With the re-entry of MM at 1.84 vs last friday closing price of 2.64, he is already enjoying closed to 50% paper profit.

We know that he is using his CPF to buy MM, which means CPF interest rate (dividend) is 2.5%.

50 / 2.5 = 20 years.

which means if he sell MM now, it's equivalent of 20 years of CPF interest gain.

In term of MM's dividend which is 12 cents aka 4.55% now,

50 / 4.55 = 11 years
which means it's equivalent of 11 years MM's current dividend rate.

Selling and buy something more meaningful?

Think hard especially current C19 situation... extreme volatility is expected bah.

Might make sense to look at AP Oil?

---------------------------------------------------

There is another guru which deserve some mention.
Again, his blog reflected his thinking process which we could learn something.


Hope everyone enjoy as much as I did.
Smile

The guru is actually a dreamer who dare to try - Brian of FFF
https://www.3foreverfinancialfreedom.com...tocks.html

28 October 2016
X + Y + Z = Total Returns

where X represents the Dividend Yield (%), Y represents the Dividend Growth (%) or Capital Gain (%), and Z represents the valuation factor.

My Favorite Strategy
Obviously, the best you can get out of your returns is through achieving a high X, high Y and high Z. While they are not impossible to find, they are not easy to detect as well because for most of the part the Y and Z function are unknown factor where individual competencies and time investment put into the research matters. So I won't be stating the obvious for the purpose of this exercise.


1.) High X + High Y + Low Z =  In Excess of 10%
In my current portfolio, Micro-Mech and UMS (both recent additions) falls under this category as both companies owns good balance sheet, good cash flow, high dividend yield and a stronger semi-con industry demand set to grow in 2017/2018 means that demand order will grow.

17 November 2017
https://www.3foreverfinancialfreedom.com...pdate.html
I have also similarly added 15,000 shares of Micro-Mech at a price of $0.84 on the same thesis. I had the luck of adding them right before they went ex-dividend so I am entitled to that 4 cents dividend (that's $600 in absolute amount!!!). The difference between this and UMS is that Micro-Mech covers different segmentation of the semiconductor in a separate segment, e.g Medical, trans-robotic. Should they remain their 6 cents total dividend, that still translates into 7.1% yield, so it's another solid dividend yield play for the portfolio.

21 April 2017
https://www.3foreverfinancialfreedom.com...lysis.html
For the purpose of this article, I'm going to zoom down into the financial analysis for Micro-Mechanics. If you are interested to read on the company in details, you can google around and you'll find blog post article from heartlandboy and 10centsperannum which you can familiarize around.

Final Thoughts
I'm not usually an optimistic bunch in terms of holding the company for longer term while awaiting for growth to take place. It feels like there's always something which can goes wrong and I might not be willing to take the risk in terms of risk-reward play, unless the reward is clearly so big

Micro-Mech will report its Q3 earnings on the 28th Apr.

21 Jun 2017
https://www.3foreverfinancialfreedom.com...tocks.html
Stress test for small cap
I have picked a few small cap stocks which I have added to the list while they remain in my interests. I will be using 4 scenarios: the 2008 GFC, 2011 Euro Crisis, 2015 China scare, and 2017 of today. I specifically picked scenarios where the STI has been much impacted by certain events to see how valuations are.

Micro-Mechanics
Tai Sin Electric
Transit Mixed Concretes
Riverstone
Silverlake
UMS
Sarine Tech
Nam Lee Metals
Second Chance
Boustead
Kingsmen

1 November 2017
I had divested HK Land, CDLHT and Micro Mech much earlier. Looking back it does seem a pity and should have hold on longer to it.

<To be continue>

enjoy a special day, bro ...



Stay home and stay safe, everyone.
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Rainbow 
28 Dec 2020, Monday - Start of Phase 3
[Image: 9di3hjteg4561.png]

Stay home and stay safe, everyone.
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Oh oh, btw, Youtube was down this evening...
Heard that Google also massive disruption too.
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Rainbow 
'cont
Follow a dreamer who dare to try - Brian of FFF
https://www.3foreverfinancialfreedom.com...tocks.html

18 Oct 2016
In my current portfolio, Micro-Mech and UMS (both recent additions) falls under this category as both companies owns good balance sheet, good cash flow, high dividend yield and a stronger semi-con industry demand set to grow in 2017/2018 means that demand order will grow.
Brought Micro-Mech 15,000@$0.86 S$12,900

8 Jun 2017
Sold Micro-Mech 15,000@1.26 S$18,900. Looking back it does seem a pity and should have hold on longer to it.

Aug 2020
I have also added Micro-Mechanics at an average price of $1.85 after a couple of very strong showings performance from the other semi-con companies such as UMS, Frecken, and AEM. I'll classify this as a dividend play for now in the portfolio as it provides both the dividend and the growth factor needs that are evident going into 2021 with 5G infrastructure in play.
Brought Micro-Mech 11,300@S$1.85 S$20.905
Classified under Dividend play

Oct 2020
Add on Micro-Mech 18,000

Nov 2020
I've reduced my stake for Micro-Mechanics upon the announcement of the good Q1 results which sent its share price rising by more than 20% (and more than 40% since my purchase a couple of months ago). I still kept the majority of the shares at the moment but given the run-up ahead I wanted to trim it down a little bit.
Sold Micro-Mech 5,600

Remaining 12,400@2.59 S$32,110.00
Re-classified under Compounders play

Dec 2020
Sold all Micro-Mech ?? Disappear from 3F portfolio

Brian had sold out Micro-Mechanics.
What about you?



Stay home and stay safe, everyone.
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Rainbow 
Investment journey of MM.

Another cool morning started and wish everyone a nice weekend and holiday aheads.

At this moment, there are more and more (financial) bloggers and analysts covering MM vs 3 years ago.

MrFI2024 and 3Fs write down their thought process in term of investment merits for Micro-Mechanics and their investment journey (thou not always in sync with their written thought processes) is worth studying in a bit details.

Their (published) investment journey, would be something that we can related to and make a conscious decision to learn from them and avoid the mistake?

$2.70 as at 18 Dec 2020

3Fs
Oct 2016 Brought @86cents
Jun 2017 Sold @126cents
Aug-Oct 2020 Brought @185cents 
Nov-Dec 2020 Sold @260cents (estimated by me)

MrFI2024
Sep 2016 Brought @91cents
Aug 2017 Sold @141cents
Nov 2019 Brought @184cents (Using CPF)
??? Selling price???


FinancialAvocado was a recent investor for Micro-Mechanics.
He has a nice write up on MM's investment merits which is similiar to Heartlandboy and Apenquote.

However, FinancialAvocado has a distinct advantage because after a lot of valuebuddies questioning on MM's operating results and moats, there were systematic and significant clarifications from MM in this year AGM.
(read MM's Moat bar)

With the benefit of clearer picture, FinancialAvocado had written a brilliant piece of initiation report on MM.

(click to read a well done report on MM by FinancialAvocado)
(click to read an equally well done initiation report by Heartland Boy)
(click to read one of the few excellent analysis by Apenquote)

With all hindsight, it's getting clearer and clearer on why and how MM (un-)orthodox financial practices and outstanding culture/team could be something worth studying.

For example, we all know that famous Prof Mak love to write about "bad" corporate governance. Do you know that Prof Mak actually prefers to write about "good" corporate governance?  

[Image: uc?id=1y49OD48LipTC_inBr4Iro-3MtZKT7uHb]

Prof Mak - will leave it to another post or for valuebuddies to check.

Let's go back to FinancialAvocado.

[Image: Screenshot-2020-10-07-at-4.07.09-PM.png]

[Image: Screenshot-2020-10-07-at-4.08.12-PM.png]

Is Micro-Mechanics worth investing?

7 Oct 2020
Business Quadrant
- Consumable = recurring revenue
- Rivals (Futani Engineering and Craftronics, SPT Asia)
- no single direct rival on the same full range
Six key moats
1. High switching costs - "Toyota" of the semicon industry. Superior quality, fair price while focusing on cost efficiency
2. Economies of scale - highly automated, low costs, 24x7x365 (even during C19 resticted movement)
3. Wide distribution network - strong global presence with 5 mfg facilities plus sales presence in Taiwan
4. Brand equity - extended product range + geo + scale = customer stickiness
5. Govt regulations - N/A
6. Patents - propietary technology and understanding of parts
5/6 moats fullfilled - pretty well done!

- High gross profit margin is a testament to its competitive edge and ability to retain pricing power in a very cyclical sector

Management Quadrant
- Insider ownership 40%, showing skin in the game
- Management is fairly compensated and aligned with shareholders' interest

Financial Quadrant
Positive: rising DPU, no bank borrowing, cash $20m, low capex to CDO %
Negative: payout ratio over 100% for the past 2 years. FCF yield lower than div yield aka not sustainable div payout. however, note that 15m div still less than 16m FCF(2020)

PB ratio: overprice
DY: great undervaled buy at this moment
Generally, I tend to use DY for dividend stocks and PB for REITs (since REITs are tangible real assets).
As such, using DY tells us that MM is a great undervalued buy now!

MM - a 4/5 BUY rating as a resilient and growing dividend stock.



Really, with hindsight, FinancialAvocado wrote an excellent piece of initiation report which is much much better than any financial analysts and bloggers.

His conclusion is sound and not totally unexpected thou.

MM had been and always been overpriced.

My initiate purchase of MM was 40+cents few years ago.
At that point in time, it's NAV was 30+cents and hence PB was already high.

At this point in time, MM's PB is extremely high, by all standard.

FinancialAvocado will recommend a buy as MM dividend yield and growth potential is actually the measuring yatchstick.

What do you think?

Enjoy:


Stay home and stay safe, everyone.
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Rainbow 
MM is a dividend stock?

Yesterday, Chris donated 2.85m shares to "The Borch Foundation".
Since 2004, Chris and his family donated a total of 7.85m shares.
https://links.sgx.com/FileOpen/MMH-Borch...eID=643007

A lot of valuebuddies is wondering what set MM apart from its peer?

Quite a lot of differences, if you study MM in more details.

As a dividend stock with good DY, "The Borch Foundation" would be able to continue operating without selling a single stock (MM share).

This would allow the not-for-profit organisation to run perpetually
- another characteristics (and culture) of Micro-Mechanics.

I called this build to last.

If we follow the same logic, then a closer look at MM's twenty largest shareholders would also exhibit a similar patterns too, eg Tan Boon Khak Holdings etc

The secret was mentioned by CFO Chow during recent AGM too:
The CFO then moved on to “Dividend Performance” which was his favourite slide because it showed how healthy the Company was in terms of cash flow. With shareholders’ approval of the dividend, the Company declared a total dividend of 12.0 cents per share for FY2020 (10.0 cents per share for FY2019). The Board of Directors recommended an additional special dividend of 2 cents having taken into consideration, among other things, the dividend might be useful to some members during these difficult times of Covid-19. The CFO also shared that in 2009, the Company paid 513% of earnings right after the global financial crisis (2 cents dividend out of half a million profit) and it received very good feedback from members who were appreciative of the dividend. The dividend payout ratio for FY2020 was 114%. There were some questions from members on whether the dividend could be sustained and the Company had published its response before the meeting. The CFO stressed that for dividend payments, the main factors to be considered would include profits, good cash flow and capex budget.
https://micromechanics.listedcompany.com...3M9K.1.pdf

Thank you Chris, Chow, COO Low MW and the hardworking team for building a business from good to great!

Thank you.
[Image: track-shack-dedication-borch-medium_large.jpg]

Stay home and stay healthy, everyone.
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Rainbow 
SL
Stamford Green located at 905 - 919 Hay Street, Perth Western Australia
https://links.sgx.com/FileOpen/SLC-Ann-D...eID=643765

Sold on 29 Dec 2020 - it was vacant since expiry of Chevron's lease in Apr 2020.

Financial effect:
NTA drop from 0.62 to 0.60
EPS drop from 3.10 to 1.66

A 10 years old video introducing the property:


Stay home and stay healthy, everyone.
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Rainbow 
This is not a discussion on SL but just extract from this week announcement with some re-sequencing which make it easier to understand.

Since Admin discourage discussion on SL, kindly refrain from making any comments.

It's just another documentation of my investment learning journey.

https://links.sgx.com/FileOpen/SLC-Ann-D...eID=643765

Stamford Green (aka Dynons Plaza) is a 14-storey commercial office building with 3 heritage premises in Perth, CBD.

It was leased to Chevron on a 10 years lease which expired on Apr 2020.

Since then the office remain vacant due to poor leasing conditions and high vacancy in Perth CBD, compounded by the C19 pandemic.

On 29 Dec 2020, Redhill partners investment pty ltd (Redhill) purchased the property (SPA) for SGD 68.3m after arm's length negotiations on a willing-buyer willing-seller basis.

Due to the time sensitive nature of the transaction, no valuation was carried out.

Take note that the sales price, together with past rental income collected, is more than 90% of the initial investment outlay by the Group.

The sales is subjected to Redhill obtaining approval from the foreign investment review board.

Rationale and use of proceeds
1. redeploy funds into other investments
2. reinvest in future investments

Financial effect:
NTA drop from 0.62 to 0.60
EPS drop from 3.10 to 1.66
 
Stay home and stay healthy, everyone.
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Happy New Year!!!
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Rainbow 
Happy New Year.

A new year had started and I'm very grateful for all the kind sharing by our valuebuddies.

I had learn and gain a lot from you, although you might not realised.

Gratitude.

I had in 2020 attempted to invest on SGX bluechips and other than Wilmar, the rest is not impressive.

I wont says the experiment had failed but it had proven my point that small cap is more suitable for me.

Thank you everyone and hope you could reap the benefits of staying invest in 2021 and beyond too.

Thank you.


Stay home and stay safe, everyone.
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Rainbow 

Stay home and stay healthy, everyone.
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