MI TECHNOVATION (RM 4.35)
PE – 65
ROE – 7.52%
ROA – 6.46%
Net Profit Margin – 22.3%
Quarter revenue is at historical high @ RM 117mil
Mi Technovation Bhd, a company that is involved in automated test equipment (ATE) industry. ATE makers are the ones manufactures testing machines and sell to OSAT players. Some big players in the ATE includes, Vitrox, Penta, Teradyne, Advantest, etc.
MI as a rather new player in the industry, listed on Bursa in 2018 with annual revenue of RM 160mil is also expected to surpass RM250mil of revenue in this financial year December 2021. Apparently, MI is in a high growth industry and if competes well, MI can definitely be growing very fast.
Looking into MI, it has two business units, (SEBU) Semiconductor Equipment Business Unit and (SMBU) Semiconductor Material Business Unit. Based on its latest quarter report, SEBU is still the major earnings contributor to the company. The company is also operating in Taiwan, Korea, China and local. The first three are where the big players and top talents are. Korea and Taiwan are famous for their advancement in semiconductor and this industry contribute a high percentage to their GDP. And China is aggressively building their semiconductor supply chain internally due to trade tension with the United States. Moving on, semicon industry will be growing very fast in China.
For MI, they are now well positioned themselves to secure businesses from OSAT players. This can be seen from their latest quarter report, where revenue and earnings grew tremendously. To recap, MI went listed in 2018 and spent its fund in their floor space expansion, talent recruitment, new research and development centre in Korea and Taiwan and business acquisition. From the development in MI, it is very clear that management is pursuing growth not only in Malaysia or South East Asia, but in places where semicon industry is most advance globally. They want to set foot in the most competitive environment and catch up with the top tier players. Well of course, execution part is a question, hopefully it works out well despite the competition.
In ATE, capital expenditure is mostly on research and development, it is unlike OSAT players where they spend high expenditure in machineries to perform testing, packaging and others for clients. To stay abreast with the latest technology and technic, one must stay close to the market, recruit top talents and continuously invest in R&D department. I believe setting centre in Taiwan, Korea and China is a correct move of the management.
Lastly, of course there is plenty room for growth in MI and they are on the departure path. I believe many investors are looking into MI as well. The problem still stays with its high valuation at PE 65. When the margin of safety very low, investing at this share price is quite dangerous. Some may say, PE is irrelevant in a high growth company and I do agree with them to a certain extend.