MMS Ventures

Jumping On The LED Bandwagon

Publish date: Wed, 31 Dec 2014, 11:11 AM 

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MMS Ventures is principally involved in manufacturing of test equipment for Light Emitting Diodes (LED) manufacturers.

(Light Emitting Diodes. Playing an increasingly important role in lighting due to their energy efficiency. Displacing traditional lighting systems based on light bulbs, etc. MMS does not manufacture LEDS. It manufactures the test equipment used by LED manufacturers) 

(Test equipment for LEDS. MMS Ventures started as a specialist in industrial automation. As such, it has the expertise to tap into the recent boom in LED demand by designing and manufacturing test equipement for LED manufacturers)

1. Company Background

The Company has market cap of RM87 million (based on 163 million shares and price of RM0.53).

For the 9 months ended September 2014, the group reported net profit of RM8.73 million. If annualised, full year net profit would be RM11.6 million. PER works out to be 7.5 times.

The group has strong balance sheets with net assets of RM29.7 million, zero borrowings and cash of RM12 million.

In May 2014, the Company declared interim dividend of 1 sen per share. Hopefully it will report further profit and pay out more dividend in the coming quarters.

2. Jumping On The LED Bandwagon

For many years, the group has not been profitable. However, since June 2013, they finally found their niche.

Their core expertise is in industrial automation. In other words, they have expertise in electronic and mechanical engineering. They know how to work with metals to form mechanical production system and then incorporate electronics to make it intelligent.

This allowed them to catch the opportunity arises from the recent boom in LED industry by producing test equipment for LED manufacturers. Since they ventured into the LED industry, their fortune has turned around substantially and became consistently profitable.

	Before	June	Sept	Dec	Mac	June	Sept
(RM mil)	June 2013	2013	2013	2013	2014	2014	2014
Net profit	loss making	2.0	1.9	1.0	0.8	3.3	4.7

3. LED Industry Expected To Continue To Do Well

According to LEDinside, the LED industry has done well over past two years and is expected to continue to do well going forward :-

(a) Market size doubled to USD 12 billion in 2012.

(b) Market size expected to reach USD 19.9 billion in 2014.

(c) Market size expected to further increase to USD34.7 billion in 2016.

4. Concluding Remarks

I am not an economist. However, based on my observation, Malaysia economy might face some headwinds in 2015.

Plunge in oil price will adversely affect Petronas' dividend payment capacity. This will reduce the government's revenue and weaken the Ringgit, which will give rise to a whole host of problems (let's not dwell too much into it).

Many industries could be adversely affected : construction, oil and gas, banking, properties, consumer products (due to higher input cost), etc.

In view of the above, for 2015, I am focusing on stocks that does not rely too much on the Malaysian economy.

According to MMS' latest quarterly report, 52%, 31% and 17% of its sales are to customers from Malaysia, US and other Asian countries respectively. Even though closed to half of its sales are from Malaysian customers, the bulk of it is for LED manufacturers based in Malaysia. These manufacturers export their products and do not rely on the Malaysian markets. In this regard, MMS is almost 100% insulated from Malaysia's economic performance in 2015.

Hopefully by parking my money with MMS, I can make some profit in 2015 despite the expected difficult times ahead.

I would like to wish everybody a happy and prosperous new year.

Have a nice day.