Micro-Mechanics (Holdings)

[chialc88]

Good evening Valuebuddies,
Take a pause... Kiss the rain

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Valuebuddies who read my blog (erh, meant "travel and tour" sub-forum)
will know why I'm so keen in Micro-Mechanics.

For the young one, allow me to repeat.

It's actually a paradox.

You see, Micro-Mechanics operate in high tech, precision engineering field.
A characteristics companies in this field is high capex.
Why?
Simply because the technology keep changing.
Electronics stuffs getting more and more sophisticated.
Every 6-12 months, a newer and faster gadget is going to be roll out.
Nobody repair anything any more.
Once spoilt (or not even spoilt, just 1 or 2 years), change.

The consumer usage pattern encourage the business to paddle and dish out better performance and yet same or cheaper price electronic goods.
No ending.

Miniaturisation kick in too.
More and more electronics is packed into a smaller and smaller footprint.

The factory/production line need to be build for the production and assembly of these miniature products.

Capex will and must go up.
Full stop.

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The paradox which tickle my brain is exactly this.
The girly magazine that I read (in my dentist) describe this company with machine that's still in use after fully depreciated.
The depreciation is typically 10 years and the machines are already 15 - 20 years old and it's still in use.

When I started to dig in, first I search for financial blogger talking about Micro-Mechanics Capex.
None of them mentioned this.
They are saying the same impression that everyone has aka electronic sector --> high Capex.

I sit down and think about the paradox and I realised how beautiful is Micro-Mechanics.

1. Despite all the bloggers saying about high Capex, Micro-Mechanics is able to fund these "high" Capex using cash that it generate from business.
aka did not dig into debt <-- zero debt.
2. Despite "high" Capex, Micro-Mechanics is able to find enough cash to take care of dividend for it's shareholder 
aka increasing dividend growth rate.
(for your information, it's solid 10 cents for the last 2 years).

I got my answer for my paradox.
What about you?

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I'm going to switch gear and OT a little bit.
I personally benefited tremendously from one of our valuebuddy - Chris.
I just read his 2nd posts on his dad and I felt for him.

I doubt we live for money.
I seriously think that Micro-Mechanics is a business that all valuebuddies should learn as a case study of company build to last.
I don't know whether you classify Micro-Mechanics as a value investment
but I can tell you that Micro-Mechanics was and is never under-value.

Take care and move on, Chris.
I thank you for grooming me to be a independent thinker specifically in personal investment.

[¯|_(ツ)_/¯]

Ferrari vs Safety Car
Another record number of crashes and S. Vettel emerged as a winner again.

Micro-Mechanics is never a F1 racing car.
It's always the safety car supporting those F1 cars.

My analogy.

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Since I discovered Micro-Mechanics (by observing it's CAPEX paradox),
I continue to discover more and more simple and intuitive *things* that any good company can and should do to improve their business performance.

For example:
1. Improving safety of it's CNC machines
    - by installing safety guard to protect/reduce the risk of the workers operating on these machines
2. Reducing transition ie the need to move unfinished product from machine in one room to machine in another room
    - by re-locating the machine in a production chain to the same room
    - by setting up a simple conveyor belt to ferry instead of using human labor

These improvements is quite trivial and most company should be able to make similar recommendation by observing their production floor too.

Now!!!

This is very similar to what most people thinking and asking.
Did MM has any IP? any Patents? or any thing proprietary that can consider as its moat?

I think that MM does not have any visible IP, Patents or proprietary thingy (YET) that its customers must rely on.

Thinks again!!!

It is exactly this void that I find another beauty of MM.

MM is in a highly competitive - high tech - high precision engineering industry with cut-throat pricing pressure.
Without any visible edge and niche, why would MM customers insists of buying only from him?

Mind you, when a customer decided to buy from MM, say product A, it will not buy product A from someone else.
Not only it will not buy, its customer would not even consider buying from another supplier.

MM is their sole supplier.

Full stop.




I see a beautiful Micro-mechanics, building a cash generation machine,
from GOOD to GREAT - Jim Collins.

That's why, fyi, back in 2016, I declared that I had probably made THE biggest mistake in stock:
I fall in love with MM.

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感恩 

[Ray168]

MM is in a highly competitive - high tech - high precision engineering industry with cut-throat pricing pressure.
Without any visible edge and niche, why would MM customers insists of buying only from him?

Mind you, when a customer decided to buy from MM, say product A, it will not buy product A from someone else.
Not only it will not buy, its customer would not even consider buying from another supplier.

MM is their sole supplier.

Full stop.

It is not true that MM is sole supplier. I would say MM is their main supplier for most semiconductor tooling.

Yes, MM has an economic moat to protect their business as the qualification of using the tooling take time, and most the time the process engineers are not willing to spend time to run a new qual for other competitors. However, as a measure of risk management, these semiconductor companies will have 2nd or 3rd source of tooling supply.

[Squirrel]

Ferrari vs Safety Car
Another record number of crashes and S. Vettel emerged as a winner again.

Micro-Mechanics is never a F1 racing car.
It's always the safety car supporting those F1 cars.

My analogy.

---

---

Since I discovered Micro-Mechanics (by observing it's CAPEX paradox),
I continue to discover more and more simple and intuitive *things* that any good company can and should do to improve their business performance.

For example:
1. Improving safety of it's CNC machines
    - by installing safety guard to protect/reduce the risk of the workers operating on these machines
2. Reducing transition ie the need to move unfinished product from machine in one room to machine in another room
    - by re-locating the machine in a production chain to the same room
    - by setting up a simple conveyor belt to ferry instead of using human labor

These improvements is quite trivial and most company should be able to make similar recommendation by observing their production floor too.

Now!!!

This is very similar to what most people thinking and asking.
Did MM has any IP? any Patents? or any thing proprietary that can consider as its moat?

I think that MM does not have any visible IP, Patents or proprietary thingy (YET) that its customers must rely on.

Thinks again!!!

It is exactly this void that I find another beauty of MM.

MM is in a highly competitive - high tech - high precision engineering industry with cut-throat pricing pressure.
Without any visible edge and niche, why would MM customers insists of buying only from him?

Mind you, when a customer decided to buy from MM, say product A, it will not buy product A from someone else.
Not only it will not buy, its customer would not even consider buying from another supplier.

MM is their sole supplier.

Full stop.




I see a beautiful Micro-mechanics, building a cash generation machine,
from GOOD to GREAT - Jim Collins.

That's why, fyi, back in 2016, I declared that I had probably made THE biggest mistake in stock:
I fall in love with MM.

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感恩 

Wow, new identity? Why?

[¯|_(ツ)_/¯]

MM AGM for valuebuddies - 30 Oct 2019@2pm

This morning, MM released it's AR and official invitation for valuebuddies at 0045hrs.
(link to MM AR)

I know hardcore valuebuddies will digest within next few hours.
For those not very familiar with high tech, high precision manufacturing and still keen to learn about a company build to last,
read page 1 of AR by Sumitri Menon.

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I changed my nick because I am ashame of myself.

I benefited tremendously from all valuebuddies posts and I thought I should put in some efforts and contribute back to valuebuddies journey.

As I'm not a financial capital analyst nor a expert in valuation, so I see what I could and I wrote.

I am fully aware that I'm not like most valuebuddies and I'm very conscious of what I wrote.

I am careful enough to write about my travel and tour stories.

These, mind you, were and will be always my actual travel experiences and my investment learning journey.

I only post those places that I had been and things that formed part of my life long learning journey.

I started slowly to post into normal section of VB.COM as I'm getting more comfortable writing.

During the recent stock market downturn (few years ago), I saw the posts in VB.COM slow down and I become a bit worry.
I increase the number of my post especially in Travel sub-forum which I could freely wrote what I wanted without any problem at all.

Mind you, I spend my time not just typing but also sourced for interesting picture and video to put a background to my posts.

These picture and video (both in travel sub-forum and normal section) - to me - differentiated VB.COM from the rest of the financial forum.

These incurred time and effort.

Again, you see the latest stock market downturn, even fewer posts in VB.com and I'm very worried.
Despite how I felt (ashame), I increased my posts here.

I know that with increasing posts, I'm going to kana one day from moderator.

I cannot take the chance.

I know it's my mistake and moderator is just doing their job.

I know.

But, I must protect myself as I am a human and I cannot swallow what is throwing at me.

Hence, I thought another nick might help to put my mind to ease.

Make sense?

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@Ray168 (what a wonderful nick)
I reserved my comments on sole supplier.

I agrees with you that MM has an economic moat.
I just wonder why you're so sure that MM is a castle with a moat and not just a castle itself.

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感恩 

[¯|_(ツ)_/¯]

Good morning valuebuddies,
what a wonderful feeling to be waking up slowly by the birds chirping happily in the woods.

The question was never MM is a strong company.
The question was always whether MM has a moat.

MM is a strong company and the question is how long will MM remains strong?
aka, does MM has a protective moat? 
is MM moat widening?

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Being with an end in mind.
MM was founded by Chris many years ago.

Many years ago, Chris wanted to go into a business that will provide high margin.

The benchmark for the business is 50%.

During AGM, when MM proudly announced that it had met the KPI of 50%,
it's not by chance.

It's a choice made by Chris when he created Micro-Mechanics Inc.

It's a niche market in high tech, high precision manufacturing sector
with characteristic of highly cyclical, high capex, high product/equipment obsolescent industry.

It's a niche segment in this industry that Chris saw a high margin business
... which today, we know that Micro-Mechanics dominating the landscape.

The questions is whether MM is able to survive in the next/coming crisis?



Amazing, isn't it?
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感恩 

[¯|_(ツ)_/¯]

4 Stocks This Week: Food Empire, Micro-Mechanics, Tuan Sing and Vicom

(link)

The numbers of award might mean something, and of course, it might mean nothing too.

We are more concern on the upcoming crisis is real.

Question is whether MM is able to survive and continue to pay out the dividend that we needed?

Enjoy:


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感恩 

[¯|_(ツ)_/¯]

Just received MM's FY2019 Financial Report.

There is still a question on whether Micro-Mechanics having a moat or it's just a castle.
There is also another question on how Micro-Mechanics will fair during the coming crisis.

Meanwhile, as what the fools says: you got paid to wait.

(link to Yahoo and then link to fools.com)



Don't cross streams to find water.
- A Swedish saying

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感恩 

[Poonified]

Just received MM's FY2019 Financial Report.

There is still a question on whether Micro-Mechanics having a moat or it's just a castle.
There is also another question on how Micro-Mechanics will fair during the coming crisis.

Meanwhile, as what the fools says: you got paid to wait.

(link to Yahoo and then link to fools.com)



Don't cross streams to find water.
- A Swedish saying

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感恩 

Hi, newbie here. I wouldn't say that MM has a moat, tooling is more dependent on companies' operating expense instead of capex so its business in the cyclical semiconductor industry is of a lower risk compared to semi-con equipment manufacturers. 
I think their margins will surely suffer in the downturn but qn is how much. 
Balance sheet is pretty solid so I think dividend wont be affected. 
Btw, love their management and their focus on cost control.

[¯|_(ツ)_/¯]

Sumitri Menon, Christopher Reid Borch, Low Ming Wah and Chow Kam Wing

Yes, valuebuddies had acknowledged that Micro-Mechanics management demonstrated excellent cost control capabilities.

That's a fact and it's one of the main reason why I fall in love with Micro-Mechanics.
I feel that Micro-Mechanics should be able to survive the looming downturn too.

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Years ago, when I started to dig into Micro-Mechanics.
I realised that Chris is very serious aka particular about human resources.

Chris is an American, so I thought his view on his employee is rather unique.
For example, the number of headcount stands at 490.
Chris interviewed all his employee during the recruitment exercise.

I mean, this is another example of Micro-Mechanics doing something extra-ordinary.

I mean, of course, we studied in our book that human resources is very important.
Once we took care of our employee, our employee will take care of our customers.
Something along the same line.

You see.
Everybody, erh, I mean every company will says the same thing.
Question is how many CEO will interview all their employee?

I know what you're thinking.
Should be 100%, right?

But, seriously....

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Other than CEO interview 490 employee during recruitment, 
Chris or Micro-Mechanics (to be politically correct) has another practice of only selected veteran can be promoted to take up key position (vs hiring).

For example, Micro-Mechanics hired it's first engineer in 1989 (Sing Poly diploma holder).
You know him. He had been promoted and become MM's COO - Low Ming Wah.

Another example, current CFO Chow Kam Wing.
He was brought in in 1996.
In 2003, he help to list Micro-Mechanics in SGX Sesdaq (now known as Catalist) .
2008, upgraded to SGX mainboard.

Watch this:
Important - stay alert at 1" and also 3".  
Different people has different interpretation of what you seen at 1" and 3".
My interpretation is very simple - MM is build to last.



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感恩 Thanks all valuebuddies for helping me in my investment journey.
I learn a lot and it's time for me to payback.
Thank you.