Small is indeed Beautiful

"I don't want to sound like a used-car salesman, but this car is a real cream puff," Warren Buffett when he donated his Lincoln Town car for an eBay auction starting Sept 12 to raise money for Girls Inc.

We risk sounding like a used-car salesman by discussing about Micro Mechanics again. MMH, the semiconductor industry supplier, was featured last month. It supplies such consumables to more than 300 semiconductor companies including Intel, Amkor, Infineon and STATSChipPac.

MMH has reported its FY2006 results. As we expected, its report card was sterling. Of note, was its ability to expand its net profit margin from 20.5% to 24.4%. Its top line continued to register healthy growth of 19%. This stunning set of numbers was achieved with no gearing. There is probably no necessity for MMH to leverage up in the near future as it still maintains a healthy cash balance of S$12.9 million, representing about 19% of its market capitalization. With its coffers bulging with cash, management intends to reward shareholders with a larger dividend payout this financial year (dividend yield: 7%).

At current prices, MMH has a P/E of approximately 9, P/S of 2, and P/NAV of 2. We consider MMH a growth counter at value prices.