If nothing goes wrong, FY2015 will easily be the best year for Micro Mechanics.
What is good about Micro Mechanics?
Buying a growing industry(Semicon) without a need to choose the winner. Average ROE of 16% for past 15 years(FY2000 to FY2014) or 25% on cashflow basis. All the while the company is having excess cash and will be better if not for trying to grow another business CMA.
Pretty good chance that the future will be the same for Micro Mechanics – up and down but above average return on over a longer period. And this is for semiconductor tooling business.
For CMA, it is tough. Not my first time saying it and won’t be my last time. Management sound positive on it on the most recent AGM minutes which make me think that it is turning. But let face it, in order for it to produce the same kind of return as semiconductor tooling, it need more volumes, which mean Assets turnover need to be higher. No trick. 24/7 got to work very well. Which is why the management is keen on it. Bigger market.
But just like semiconductor tooling, the harder it is, the more competitive advantages it will enjoy when the company is able to break the code and do well. Can Micro Mechanics breaks that code?
Owned the shares for over 10 years and my last purchase was during the crisis. Despite all the dividends, my return is just So-so. Rightfully so. Because I did not buy cheap enough and the company is not growing fast enough and neither has the share price gone crazy. A lesson on paying a fair price for a good business that has lot of bumps.
The next 10 years look better than the last 10 years. Better if they broke the code of CMA.