Manufacturing Integration Technology

Manufacturing Integration Technology (MIT): (S$0.275) On track for blowout year; SG50 dividend declared
MIT has broken new records for profitability and sales in 1H15 as net profit surged to $12.9m (1H14: $0.8m, 2H14: $9.4m) and looks set for a blowout 2015.

In 1H15, revenue spiked to $53.3m (+139% y/y, +27% h/h), boosted by new solar orders, continued growth in the semiconductor sector and steady increase in contract equipment manufacturing (CEM) sales.

The profitable solar segment, which constituted 15-20% of overall sales in FY14, is on track to account for 20-25% of MIT's FY15 top line, underpinned by China's push to tackle its massive air pollution crisis through investment in renewable energy.

Coupled with economies of scale, MIT's gross margin continued its upward trajectory to 43% (1H14: 22%. 2H14: 34.9%).

Earnings also benefitted from other gains, comprising rental income ($0.3m), disposal gain ($0.3m) and FX adjustment gains ($0.3m), partially mitigated by a tax provision ($1.9m) compared to none in 1H14.

The stellar half may come as an understatement to its sales target of $100m set for 2015, compared to the record sales of $64.3m in FY14.

This should be supported by its order book of $50.9m, expected to be completed by year-end. However, management flagged that some orders may be pushed back to 2016, pending resolution of its customer’s issues with their ultimate user.

Nevertheless, group's 1H15 earnings has already exceeded FY14's record.

To further bolster growth, MIT is in pursuit of a major clean-tech project for implementation in 2016. If successful, this CEM project involving hydrogen fuel cell technology is expected to broaden its presence in the clean-tech space, a segment which complements current activities in solar and energy saving LED equipment.

Balance sheet remains strong with net cash of $10.8m, representing 4.9¢ per share, or 18% of market cap.

On the strong results, MIT declared a special "SG50" DPS of 0.5¢.

Valuation is very attractive at 2.8x trailing P/E (2.3x ex-cash), supported by an indicative 1.8% yield. This is compared to closest peer UMS (9x) and Micro-Mechanics (8x).

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