Sold Sheng Siong (CPF) to buy Micro-Mechanics (CPF) but …… bought AEM (cash) instead

Micro-Mechanics is my worst performer in my portfolio in Q1. It has dropped by a whooping 27% since the beginning of the year.

As seen from the above chart, there was a steep drop in February after it announced a much weaker Q2 performance and interim dividend was cut from 6 cents to 3 cents. After that the price just drifted like most of the time, until the recent decline in March. And the price dropped hit $1.37 by the end of March!

That caught my attention and I thought this could be an opportunity to buy back what I sold last May. Assuming the final dividend remains at 3 cents, that will be a total of 6 cents dividend for the year and that will give a yield of 4.4%. Not bad but given the current environment, that isn’t really that attractive.

However, if we are near the bottom of the current semi-conductor cycle, then business might pick up in the second half of this year or by next financial year. Given the track record by the management to share their profit with the shareholders when they do well, then there is a good chance of increasing dividend in the coming few years.

IF the dividend goes back to 9 cents, then the yield will jump to mid 6%! Not forgetting the possible capital appreciation if this is the beginning of another up cycle.

The problem is I have hit my CPFIS stock limit and so I decided to sell Sheng Siong to raise the fund for this purchase. For the record, I still think Sheng Siong is a good counter to hold for consistent dividend but I like the opportunity presented by Micro-Mechanics more.

Alas, the price of Micro-Mechanics rebounded strongly last week! By the time I received my fund, it was already trading at around $1.46. And by yesterday, it closed at $1.53! Oh well, I decided not to chase. Primarily because I am gutted to miss the offer, but also because I already have some holdings in my portfolio and the group will be announcing its Q3 results by end April.

So I can afford to wait a while. In the event that the price did not go the way I like, I could deploy it to buy more DBS after they go XB on 22 April.

Bought a bit of AEM back

The counter that I chased the price last week was AEM.

The share price spiked up by more than 10% after they made the following announcement AEM Announces High Volume Manufacturing Order Win for its Automated Burn-In Test Solution. No number is released but the delivery will commence in FY2024, with further deliveries expected in the following years.

It is very unlikely that it will make a material change to FY2024 outlook but if they can ramp it up in the following few years and couple that with return demand from Intel, then it’s probably worth to buy it at the current price.

Typically, I always buy a bit to “ease the itch” and with this purchase I can wait patiently for more information before making another decision.

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