Micro-Mechanics (Holdings) Ltd. :5DD-SG: Earnings Analysis: 2017 By the Numbers : September 14, 2017

Micro-Mechanics (Holdings) Ltd. reports financial results for the year ended June 30, 2017.

We analyze the earnings along side the following peers of Micro-Mechanics (Holdings) Ltd. – Broadway Industrial Group Limited, ASTI Holdings Limited, Manufacturing Integration Technology Ltd. and Sinjia Land Limited (B69-SG, 575-SG, M11-SG and 5HH-SG) that have also reported for this period.


  • Gross margins widened from 56.85% to 57.43% compared to the same period last year, operating (EBITDA) margins now 44.71% from 45.22%.
  • Year-on-year change in operating cash flow of 10.52% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings growth from operating margin improvements as well as one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2017 2016 2015 2014 2013
Relevant Numbers (Annual)
Revenues 57.23 51.25 52.2 43.86 39.15
Revenue Growth (YOY) N/A N/A N/A N/A N/A
Earnings 14.76 11.88 12.02 7.74 5.12
Earnings Growth (YOY) 24.23 -1.15 55.31 51.04 21.42
Net Margin 25.79 23.19 23.03 17.65 13.09
EPS 0.11 0.09 0.09 0.06 0.04
Return on Equity 28.11 24.47 27.32 19.58 13.68
Return on Assets 23.61 20.61 22.48 16.12 11.57

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Earnings Growth Analysis

The company’s earnings growth has been influenced by the year-on-year improvement in gross margins from 56.85% to 57.43%. However the company’s overhead costs have prevented it from fully capitalizing on these gross margin improvements. In fact, the company’s operating margins (EBITDA margins) showed no improvement over the same period last year.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

5DD-SG‘s gross margin improvement has not produced any big difference in its working capital. Working capital days are currently 178.60, compared to last year’s level of 168.99 days. This leads Capital Cube to conclude that the improvements in gross margins are likely from operating decisions and not trade-offs with the balance sheet.

Gross Margin Versus Working Capital Days

Quadrant label definitions. Hover to know more

Customer Financed, Cash Starved, Supplier Financed, Cash Rich

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

5DD-SG‘s change in operating cash flow of 10.52% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings


The company’s earnings growth has also been influenced by the following factors: (1) Improvements in operating (EBIT) margins from 36.59% to 37.13% and (2) one-time items. The company’s pretax margins are now 32.33% compared to 30.62% for the same period last year.

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

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Company Profile

Micro-Mechanics (Holdings) Ltd. designs, manufactures and markets high precision tools, parts and assemblies for the semiconductor, medical and aerospace industries. It operates through the following geographical segments: Singapore, Malaysia, Philippines, Thailand, the United States of America, and China. The company’s products include wire cutter blades, rubber tips, clamps with inserts and large wire equipment. Micro-Mechanics was founded by Christopher Reid Borch in 1983 and is headquartered in Singapore.

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