MMS Ventures Bhd (MMSV) is a one stop automation equipment provider focusing on smart automation for LED & semiconductor production. Driven by surge in global demand for semiconductor test equipment, we expect MMSV to register net profit of RM10.3m and RM11.7m for FY21 and FY22 respectively. BUY with a target price of RM1.65 based on 28x PER (based on average FY22 forward PER of its regional peers) over its FY22 EPS.

With its ISO 9001:2015 certified quality management, MMSV designs, manufactures, and sells automation solutions for LED, semiconductor, and the OEM/ODM markets. MMSV has more than 20 years of experience with an established track record in manufacturing standard and customized machines to serve the semiconductor and LED industries. It has built a long working relationship with most of its customers and expanded its market globally mainly in America, Europe & Asia.

Running at 80% of its current capacity, MMSV remains busy executing its outstanding orderbook of approximately RM15m. In 2021, MMSV has just signed a contract with a few new customers in U.S. for the manufacturing and distribution of OEM/ODM machines, which resulted in a 37% contribution to its total sales. Not resting on its laurels, MMSV is also actively engaging agents overseas to market its automation solutions.

We see huge growth potential for its smart devices segment and automotive segment going forward. Coupled with growing demand of chips in tandem with the development of 5G, smart phones as well as other IoT devices including smart home devices, we are optimistic of its future growth. In addition, as 43% of MMSV’s revenue are generated from Malaysia, we see potential growth as the government is urging corporates to adopt automation along with the National IR4.0 policy. Management also expect its general lighting segment to expand and contribute more to its revenue in the near term.

The company has a healthy balance sheet with net cash per share of 11.6 sen as at 9MFY21. There is also room for further expansion with zero gearing. Our buy recommendation is premised on: (i) outstanding orderbook of RM15m; (ii) potential job win in the pipelines; (iii) potential growth in smart devices segment following the upgradation of latest smart devices; and (iv) its net cash position.

Source: Rakuten Research - 2 Dec 2021