MMSV (0113)

MMS Ventures Berhad was incorporated in Malaysia under the Companies Act, 1965 on 29 March 2004 as a private limited company. MMSV was converted into a public limited company & assumed its present name on 19 Oct 2004.

MMSV was established as the investment holding company of MMSV Group in conjunction with the listing of MMSV on the ACE Mkt. MMSV is involved in the design & manufacture of LED & Semiconductor Industrial Automation Systems & Machinery. Currently, MMSV has 2 subsidiary companies namely Micro Modular System & Evolusys which is involved in the software development.

MMSV based in Penang, is involved in the design & manufacturing of automation solutions for the LED & Semiconductor industries. 

Differentiating itself from the standard test & vision inspection equipment manufacturers, MMSV focuses on LED test and vision inspection solutions that are specifically tailored to meet customers’ various requirements (at least 50% of the LED test and vision inspection equipment in the market required customised equipments). Most of its customers are world-leading LED makers, with the top ten contributing c.80% to its total revenue.

The implementations of new energy standards in several major countries (which have restricted the usage of incandescent lighting) are spurring greater demand for LED lightings. According to LEDinside, the LED lighting market value is anticipated to grow at a 4-year CAGR of 18% through 2018. It is positive trend to bode well for MMSV as nearly 90% of the group’s products are catered for LED applications. 

Meanwhile, looking from the perspective of semiconductor equipment manufacturing, worldwide semiconductor equipment sales are expected to register a decent growth of 15% in 2015 by SEMI, alongside the healthy global semiconductor sales forecasts (of mid-high single digit growth) by both SIA and WSTS, even from a high base in 2014. The growth will be mainly underpinned by the surging demand in Smartphones and Automotive in end applications. As 60% of MMSV’s total revenue is exposed to the LED of Smartphones and Automotive segments by end applications, the group which is positioned in the front-end of semiconductor value chain, is in the sweet spot to ride on the surging wave of these rising trends. the management confident to achieve 20% growth in its FY15E revenue, even from a high base in FY14 (+50%). The growth should be underpinned by surging demand of test systems and machines in Smartphones/Devices segment, which commands fatter margins.

The group is at a zero gearing position with strong net cash of RM15.7m as of Dec 2014. Although no dividend was declared since FY08 until the recent FY14 (total 2.0sens single-tier dividends were declared, representing c.31% of payout ratio), so believe that the group could offer up to 3.0 sen (based on a DPR of c.38%), translating into a dividend yield of 3.8%, based on its FY15E free cash flow projection of RM10.5m.

MMSV is also the net beneficiary from the appreciating USD, as 70% of its revenue is quoted in USD with natural hedging from its raw materials purchases (at c.20% of total costs). Based on its FY14 annual report, every 5pct of appreciation USD vs MYR would translate into RM0.378m increase in its FY14 NP (or +3.6%). Having said that, any unfavourable fluctuations would also equally corrode the group’s profitability.

Conclusion:-

1. revenue growth of 20% mainly driven by higher volume machines sold in Smartphone segment, 
2. EBITDA margin of 28.0% for better product mix.
3. Healthy LEDs demand and equipment spending to spur MMSV’s earnings outlook.
4. Strong balance sheet and healthy cash flow to support its dividend payout in FY2015.
5. Benefiting from strong USD vs MYR trend.

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