MMS Ventures Bhd
MMS Ventures (MMSV) surged to a 52-week high of 68.5 sen yesterday, rising by 75.6% from a three-month low of 39 sen on Oct 16. It was earlier queried by Bursa Malaysia on Sept 29 due to spike in its share price, to which the company responded that there was no corporate development.

Based in Penang and listed on the Ace Market, MMSV designs and manufactures industrial automation and designs precision die sets, jigs and fixtures. The company also develops software and hardware for automation and test solutions.

Revenue plunged from RM25.7 million in 2010 to RM16.3 million in 2012, but recovered to RM26.7 million last year. It returned to profitability last year with net profit of RM5.0 million and a high ROE of 25%, after a net loss of RM3.1 million in 2012. MMSV attributed the turnaround to the switch in focus from producing semiconductor material test handlers to customised LED test equipment.

The company has a diversified customer base with the domestic market accounting for 38.3% of sales in 2013, followed by the US (34.5%) and Asia ex-Malaysia (25.9%). It was the first time that the domestic market became the largest contributor to sales, overtaking the US market.

Balance sheet is solid with net cash of RM10.1 million or 6.2 sen per share at end-2Q14.

For 1H14, revenue jumped 39.1% to RM16.5 million while net profit almost doubled from RM2.1 million to RM4.0 million. However, it is also worth noting that in the same period, trade receivables almost tripled to RM12.6 million, outpacing a 1.5 times increase in trade payables to RM5.4 million.

The stock is trading at 4 times book and a trailing 12-month P/E of 14.3 times, which is not cheap. For valuations to compress, investors will need to see more evidence that the earnings recovery is sustainable.

This article first appeared in The Edge Financial Daily, on November 10, 2014.