• Business profile. MMS Ventures Berhad (MMSV), through its subsidiaries, manufactures industrial automation systems, designs die sets, jigs and fixtures, and develops computer software. MMSV has two subsidiaries: Micro Modular System Sdn Bhd, which is engaged in the manufacture of automated systems and machinery, and Evolusys Technologies (Malaysia) Sdn Bhd, which is engaged in the development of software. Based on 1HFY15, MMSV distributes its products within the domestic market (26%) and to overseas market, including the United States (40%), Asia (33%), Australia (0.18%) and Europe (0.01%).
• Net beneficiary from stronger USD against MYR. Circa 70% of its revenue is denominated in USD which provides natural hedge to its raw materials purchases at circa 20% of total production cost. Based on its FY14 annual report, every 5% of strengthening USD against MYR would translate into RM0.378m or 3.6% increase in its FY14 profit after tax. However, Chinese yuan devaluation may hurt MMSV’s export sales.
• Strong net cash. MMSV has net cash of RM17.5m or approximately 10.7 sen per share, allowing the company more flexibility in regards to business decisions and potential investments .
• Valuation is attractive. At current share price of RM0.575 per share, MMSV is trading at trailing 12 months P/E of 8x following sharp drop in share price. Excash P/E is only 6.5x.
• Technically, the stock is grossly oversold following the sharp drop in share price, as substantiated by all oscillators (MACD, RSI and Slow Stochastics). Should local bourse stage a follow-through rebound in near term , MMSV’s share price would bottom up from oversold condition. Hence, we expect share price to move higher towards RM0.60, RM0.63 and RM0.675. Supports are pegged at RM0.56 and RM0.54, with cut loss below RM0.52.

Source: Hong Leong Investment Bank Research - 27 Aug 2015