The company posts a second consecutive year of record revenue and net profit.
Micro-Mechanics (Holdings) Ltd (SGX: 5DD) is a Singapore-listed company that’s involved in the designing, manufacturing, and marketing of consumables and precision tools used in the semiconductor industry.
Yesterday, Micro-Mechanics released its earnings for its financial year ended 30 June 2022 (FY2022) where the company posted a second straight year of record revenue and net profit.
Right here, let’s look at 10 key points from Micro-Mechanics’ earnings release that investors should know about.
Revenue for FY2022 increased by 11.8% year-on-year to a high of S$82.5 million due to stellar growth in the worldwide semiconductor industry. The company saw higher sales in its three largest markets of China, Malaysia and the USA.
Gross profit margin for the year came in at 53.4%, down from 54.3% in FY2021 on the back of rising costs for materials, energy and manpower. Micro-Mechanics said that the inflationary pressures are expected to prevail in FY2023.
Meanwhile, Micro-Mechanics’ FY2022 net profit rose 9.7% to a record of S$19.8 million, up from S$18.1 million a year back.
The company’s earnings per share likewise grew 9.7% to 14.25 Singapore cents.
Micro-Mechanics’ net profit margin for FY2022 was 24.0%, down slightly from 24.5% a year earlier.
The company’s balance sheet remains rock-solid. As of 30 June 2022, it had S$20.4 million in cash and cash equivalents with zero bank loans.
As for its return on equity (ROE), the metric grew to a healthy 34.0% for FY2022, up from 31.2% in FY2021 and 25.3% in FY2020. The continuously increasing ROE shows that the company’s management is doing a great job in using shareholders’ capital to grow its business.
Operating cash flow for FY2022 fell slightly by 1.9% to S$25.2 million. With capital expenditure also decreasing for the year, free cash flow grew 7.4% to S$20.3 million. Free cash flow is money that Micro-Mechanics can use to reinvest into its own business, acquire other businesses, pay dividends to its shareholders, or buy back its own shares.
Micro-Mechanics has proposed a final dividend of 6.0 Singapore cents per share and a special dividend of 2.0 cents per share, with the total dividend for FY2022 standing at 14 cents per share, the same as the previous year.
The World Semiconductor Trade Statistics (WSTS) expects global semiconductors sales for 2022 to grow 16.3% to US$646 billion. For 2023, WSTS forecasts the market to grow a further 5.1% to US$680 billion. Micro-Mechanics should continue doing well over the long run as chips become increasingly relevant in nearly every aspect of our lives.
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Disclaimer: The information provided in this article is purely based on my opinions and is not intended to be personalised investment advice. The ideas discussed here are not recommendations to buy/sell any stock. The writer Sudhan P owns shares in Micro-Mechanics.
That article garnered lots of positive feedback and traction from the investment community.
So to benefit readers who are looking for more research tools to use for their investment research, I’m sharing more websites that a good friend of mine — Thomas Chua (owner of the Steady Compounding blog) — compiled.
Currently, the list contains 40 websites that range from tools to understand the trend of a company’s social media following to keeping track of your portfolio.
Here’s a compilation of free sites to make stock research easier.
Let’s say your close friend told you about a great company to invest in.
Being a prudent investor, you wish to dig up more on the company before deciding for yourself if the company is worth putting your money in.
The thing is you don’t want to spend too much time in this preliminary research phase.
Luckily, there are free websites that aggregate company financial data and more for investors to use in their stock research.
Here are a couple of free stock data sites that I use to find out whether a company is a high-quality one (websites arranged according to alphabetical order).
Jitta
Jitta is a completely free service that provides up to nine years worth of financial data on 19 markets, including Singapore.
Source: Jitta
Jitta includes quarterly revenue, earnings per share, and dividend data arranged nicely in a table form too.
Morningstar is a famous US financial services firm that provides independent research, ratings, and tools for investors. It’s well-known for its economic moat rating.
Morningstar provides three years worth of financial data with its free account.
It also has valuation, operating performance ratios, and dividend trends information.
If you would like 10 years worth of financial data and analyst reports, you can consider getting the Morningstar Premium account for US$249 a year.
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Strike.Market
Strike.Market is an interesting website that combines traditional and alternative data such as website traffic, Google Trends, and Twitter mentions.
It even identifies if a company is founder-led, a trait I specifically look out for in my investments.
Source: Strike.Market
On top of the above features, Strike.Market provides patent data, earnings call transcripts, executive compensation data, and the latest news and articles surrounding companies.
If you are into using alternative data for your stock research (especially for the tech companies), you can also consider the following sites:
Glassdoor (for company culture and management reviews)
SimilarWeb (to analyse traffic to a company’s website)
Tikr
I think Tikr is one of the best out there. The free account provides five years of financial data for US-listed companies. On top of that, it also gives access to company earnings call transcripts.
Tikr’s financial data is powered by S&P Global Capital IQ.
If you want access to global stocks, including Singapore ones, you can consider getting the premium version for US$14.95 per month (annual subscription). Tikr is offering a 50% discount for lifetime if you subscribe before 2 January 2022.
Here’s a snapshot showing the different features available in the free and premium Tikr accounts:
Source: Tikr
Unhedged
Unhedged is a site that allows investors to track news, tweets, events, and company reports for global equities.
The platform provides eight years worth of financial history, including forward estimates.
Source: Unhedged
Unhedged also includes company earnings call transcripts like Strike.Market and Tikr.
The platform allows you to create your own portfolios to track the stocks that you own as well.
Other Websites to Consider
On top of the above couple of websites we have covered, you might also want to check out other data aggregator sites that are available, such as:
Looking for US tech stocks to buy for the long term? Here are three to consider.
Over the past six months, even though the US’ Nasdaq has risen by around 7%, many tech stocks have taken a beating.
The common refrain is that the shares in the technology companies have risen so much in 2020 and in the early part of 2021 that they are now taking a breather as pandemic-driven restrictions are lifted.
But falling share prices in high-quality companies provide buying opportunities if investors have the long term in mind.
With that, let’s take a look at three US-listed tech stocks that have been beaten down lately, but could become multi-baggers of the future.
Definition of multi-bagger:
A multi-bagger is a term created by famed investor Peter Lynch and it refers to a stock that increases by several times its initial purchase price.
Company #1: DocuSign Inc (NASDAQ: DOCU)
DocuSign was formed in 2003 and is a pioneer in e-signature.
Over the past two weeks or so, DocuSign’s shares have plunged more than 30%.
Source: Google Finance
The culprit was DocuSign’s latest earnings release.
For its fiscal third quarter ended 31 October 2021, the company reported that its revenue grew 42% year-over-year to $545 million while operating margin reached 22%, exceeding its expectations. However, DocuSign fell short of its billings guidance.
The company said that as it moved through the quarter and into the second half of the year, it saw demand slowing down.
While it had expected an eventual decrease from the peak levels of growth achieved during the height of the pandemic last year, the environment shifted more quickly than it had anticipated.
That was the main cause of its lower-than-expected billing in the latest quarter. It also tampered its expectations for the fourth quarter.
The muted outlook caused DocuSign’s shares to crash overnight by 42%.
But I believe the stock market is too short-term oriented. Yes, demand would slow down as the world slowly opens up, but that doesn’t mean that the company is doomed for failure, as the market might suggest.
Customers who see the benefits of having their agreements signed and managed digitally won’t go back to paper, as that’s just plain inconvenience.
DocuSign says that the average savings per agreement is US$36 (due to reduced hard costs and improved employee productivity).
Another statistic shows that 82% of agreements are completed in less than a day, and 49% in less than 15 minutes.
Compare that with manual signing of documents, which involves a lot of processes: from printing, to delivering the document to the intended recipient, to signing, and eventually to filing it. What if the recipient stays in another part of the world? We would be looking at a time frame of a few days to weeks or even months.
I don’t think anyone would want to give up on those time-saving benefits just because the pandemic is subsiding and people are beginning to return to the office.
Over the long run, with DocuSign’s growing suite of products and services, there’s no doubt that the company would be able to gain a larger share in its agreements market.
DocuSign projects its total addressable market (TAM) to be around US$50 billion and its last twelve months revenue of around US$2 billion is a minute part of it.
Source: DocuSign Investor Presentation December 2021
DocuSign’s chief executive Dan Springer said it best during the latest earnings conference call:
“[T]here will be fluctuations from time to time in our business. We haven’t had one in our almost four years as a public company that’s been in any way notable. But with the leadership position we have with having over $50 billion TAM that we feel is very addressable, I have never been more confident about DocuSign and optimistic about the big growth opportunity we have ahead.”
At DocuSign’s share price of US$155.37, it has a price-to-free-cash-flow (P/FCF) ratio of 72x.
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Company #2: Fiverr International Ltd (NYSE: FVRR)
Fiverr is a marketplace that connects freelancers and people needing freelancing services.
The company’s stock price has tumbled 50% over the past six months, from US$227.95 to US$113.68 at the time of writing.
Source: Google Finance
The Fiverr share price has taken a backseat especially since August 2021 after the company announced its financial results for its 2021 second quarter.
In the second quarter, Fiverr’s revenue grew strongly by 60% year-on-year to US$75.3 million.
But the company reduced its guidance for the rest of the year due to the lifting of COVID-19 restrictions worldwide (highlighted in the screenshot below).
Source: Fiverr Press Release for Second Quarter 2021
For the 2021 third-quarter, Fiverr guided for a revenue of US$68 million to US$72 million. In reality, the firm’s third-quarter revenue exceeded its guidance.
Fiverr’s revenue for the latest quarter grew 42% year-on-year to US$74.3 million.
The increase was driven by:
Higher active buyers, which grew 33% to 4.1 million, compared to 3.1 million as of end-September last year
Growth in spend per buyer, which increased 20% to US$234, compared to $195 a year ago
Increase in take-rate to 28.4%, up 1.4 percentage points from 27.0% last year
Definition of take rate:
Take-rate measures the amount Fiverr takes a cut from transactions happening on its platform.
Fiverr also added that its business, including the traffic to its platform, improved from the hyper-seasonality that it had experienced in the earlier part of the third quarter.
So the lifting of restrictions didn’t hamper Fiverr’s business much, as feared by the company’s management in August.
In fact, Fiverr has raised its full-year 2021 guidance (screenshot below) as compared to the guidance given in the previous quarter (as seen in the earlier screenshot).
Source: Fiverr Press Release for Third Quarter 2021
Over the longer term, with freelancing gaining wider acceptance due to the pandemic, Fiverr should continue doing well.
Micha Kaufman, chief executive of Fiverr, explained in the company’s latest earnings conference call:
“We believe the secular trends of remote work, and the need for digital transformation are here to stay, well beyond the pandemic. Businesses need to stay competitive in their talent strategy, to be adaptive in the ever-changing digital landscape, to creatively address the skilled labor shortage, and to be nimble and efficient in execution.
Fiverr estimates its TAM to be US$115 billion, and it looks like it has the opportunities to grow into this large market for decades to come.
Source: Fiverr Company Presentation November 2021
At Fiverr’s share price of US$113.68, it has a P/FCF ratio of around 127x.
Company #3: Block Inc (NYSE: SQ)
Block, which was known as Square prior to this month, started off by providing dongles and apps to turn smartphones and tablets into POS (point-of-sale) systems.
Since then, however, it has expanded its business to provide over 30 products and services for businesses to help them manage and grow their business operations.
Block also owns the well-known Cash App, an ecosystem of financial products and services for individuals. Cash App competes with PayPal‘s (NASDAQ: PYPL) Venmo in the peer-to-peer payments space.
The diagram below shows Block’s two main ecosystems of Sellers (in blue) and Cash App (in green):
Source: Square Investor Presentation September 2021
Block is also big on bitcoin investment and owns the cryptocurrency on its balance sheet. As of 30 September 2021, the fair value of its bitcoin investment stood at US$352 million.
The Cash App also allows users to buy, hold and sell bitcoin.
The value proposition of Block as an investment is that as sellers and individuals use more of its services, their activity with Block increases, reinforcing the company’s recurring revenue model.
From 2016 to 2020, Block’s net revenue has shown strong growth of 54% per annum, increasing from US$1.7 billion to US$9.5 billion.
For the nine months ended 30 September 2021, the company’s net revenue has already exceeded that of whole of 2020’s, coming in at US$13.6 billion.
Meanwhile, Block posted a net profit of US$243.1 million for the latest period, as opposed to a loss of US$80.9 million a year ago.
In terms of share price performance in the short term, Block’s shares have fallen significantly over the past half year.
Source: Google Finance
However, over the longer term, the company has the potential to do well.
With Block’s large total market opportunity of US$160 billion and its penetration rates of below 3% each for the two ecosystems, Block is a company to consider for those looking for exposure to the payments and crypto space.
Source: Square Investor Presentation September 2021
At Block’s share price of US$158.30, it has a P/FCF ratio of around 131x.
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Disclaimer: This information provided in this article is purely based on my opinions and is not intended to be personalised investment advice. The ideas discussed here are not recommendations to buy/sell any stock. The writer Sudhan P owns shares in DocuSign and Fiverr.
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