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Saturday, June 20, 2015

MMSV banks on LED to keep fire burning

MMS Ventures Bhd (MMSV), a smallish technology firm with a market capitalisation of RM125.5mil, hopes to be able to sustain its growth momentum by increasing its market share in the light-emitting diode (LED) manufacturing industry.
The ACE Market-listed, Penang-based company which was listed back in 2006 is a manufacturer of specialised machinaries to optically and electically test LED components within the wider supply chain.
The company aims to sustain its performance this year aided by the ever increasing demand for LEDs that is progressively being deployed in many industries today.
“For us, we sell to LEDs manufacturers and they use them in smartphone devices.
“Increasingly also we see demand from the lighting industry and the automotive industry as well.
“Due to its energy saving feature, this segment is poised to be the next area of growth for us,” MMSV’s chief executive officer Sia Teik Keat tells StarBizWeek.
The company is targetting its growth in earnings to be sustained in its financial year 2015 ending Dec 31 (FY15).
“If all goes well, we are eyeing a growth of 20% in both top and bottomline. Of course this will also be dependent on how new orders are sustained.
“For as long as we can continue to capture more orders especially the repeat orders, then this will carry on,” Sia says.
“The market can be unpredictable and things can change anytime but so far it still looks okay,” he adds.
Tapping new grooves
MMSV has come a long way since its listing back in 2006 as prior to FY12 it was operating in the semiconductor space with 90% of its revenues derived from this subsegment then.
“We found it to be tough, the competition was too stiff and we decided to changed tack and moved on to catering for the LED segment. This didn’t come at a cost though, as we took an impairment in some of our inventories of RM3.6mil then,” Sia says.
This had resulted in the company posting a net loss of RM3.12mil even as revenues dipped by 13.2% year-on-year (YOY) to RM16.26mil in FY12, something which Sia says was a beneficial move for the company in the bigger picture.
“In hindsight, the move was a short term pain but a long term gain as we are seeing the results of our actions today. Now our company still has the expertise to cater for the semiconductor segment but this segment only contributes to about 10% of our revenues,” he says.
Since the earnings blip in FY12, the company had thereafter sustained a turnaround in its finances in the two years after until today.
In FY13, the company recorded a 261% YOY growth in bottomline from a loss making position the year prior to a net profit of RM5.02mil and further in FY14 its net profits doubled from the prior year to RM10.46mil.
Interestingly, MMSV will be able to operate on limited capital expenditures (capex) for FY15 given that it will be able to utilize its present capacity which is at 80% should there be further new orders.
“We can be capex light for this year, and are only allocating RM100,000 for this purpose. I believe this should be sufficient. Our business is not focused so much on capex but rather more focused on hiring specialised labour such as the design engineers,” Sia says.
The company notes that the type of assets it requires are not in the realm of heavy machinaries such as that is used in the manufacturing industry but rather specialised software.
“But this would not cost as much as those type of machinaries as we do some outsourcing as well. Our capex will comparatively be lower than the manufacturing companies,” he says.
MMSV also operates in a space where it is still able to adequately handle competitive pressures from the marketplace.
“We can still handle these pressures, and more so our products are niche and customised while the bigger players are doing mainly more standardised products. Around 80-90% of our products are specially customised for our clients,” Sia says.
“There are about less than 10 companies operating within this space but with 20-30% overlap of offerings between each company. Each company’s focus are not in the same area as the supply chain covers many types of processes,” he adds.
Should the company be able to sustain its growth performance moving forward, it aims to eventually graduate to the Main Market of Bursa Malaysia.
“We will consider moving to the Main Market maybe later in the year or early next year.
“The chances of this happening is more than 50%. As long as there is an advantage for us, we will apply for the transfer. We think we would have met the requirements by the third quarter,” Sia says.

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