Multi Reasons to Invest in Multi-Chem

July 11, 2024

Multi-Chem Ltd (SGX:AWZ) has emerged as a beacon of growth, showcasing impressive share price performance. Its shares surged by 35.78% over the past year, including a 13.33% increase in the past month, closing at S$2.85 on July 3, 2024, nearing its 52-week high of S$2.93. Recently designated a ‘technical buy’ by CGS International’s technical analysis, Multi-Chem’s upward momentum signals bullish prospects ahead.

Multi-Chem has been in an uptrend since 2015

Behind Multi-Chem’s robust share price surge lies a compelling growth narrative. Here’s why this small-cap company is worth the attention:

1. Strong Revenue and Profit Growth

Multi-Chem reported S$658.4 million in revenue for FY2023, a 6.7% increase from the previous year, driven by expansions in its IT arm and heightened cybersecurity spending by corporate and government entities. The company’s after-tax profit rose to S$27.1 million in 2023, up from S$20 million in 2022, with earnings per share climbing to 30.10 cents in 2023, demonstrating confidence in the company’s profitability.

Source: Multi-Chem’s 2023 Annual Report, CGS International

Source: Multi-Chem’s 2023 Annual Report

2. Increasing Dividend Payments and Attractive Yield

Multi-Chem has a track record of increasing dividends, with the net dividend per share steadily rising to 24.30 cents in 2023. With a payout ratio of about 80% in the past two financial years, it demonstrates the company’s commitment to returning value to its shareholders. At the time of writing, the dividend yield stands at 8.53%, with a five-year average yield of 8.42%, appealing to income-focused investors seeking stable returns.

Source: Multi-Chem’s 2023 Annual Report, CGS International

3. Solid Financial Health

As a small-cap company with a market capitalization of approximately S$256.77 million, Multi-Chem boasts a healthy financial profile. It maintains a net cash position of S$36.08 million and a return on equity (ROE) of approximately 19%, based on the trailing twelve month.

4. Global Presence and Market Expansion

Multi-Chem’s subsidiaries under the M.Tech umbrella have expanded the company’s product range across 27 cities in 14 countries in the Asia-Pacific region and Europe. The IT segment contributed 99% of the group’s total revenue in 2023 and is expected to contribute positively to the group’s business in 2024. The company’s strategy of promoting cutting-edge IT products positions it to benefit from the growing demand for enhanced cybersecurity measures.

5. Risk Management and Financial Prudence

Multi-Chem has actively reduced its debt-to-equity ratio, strengthening its financial position and mitigating risks. The company’s focus on maintaining a strong liquidity position and reducing debt burden enhances its resilience against economic shocks.

Source: Multi-Chem’s 2023 Annual Report, CGS International

Risk Ahead

Despite the promising outlook, Multi-Chem remains vigilant regarding potential risks. The global economic landscape is fraught with uncertainties such as inflation and geopolitical conflicts. Multi-Chem is also vulnerable to currency exchange fluctuations.

The group generates significant revenue from its IT business across various regions outside Singapore, totalling S$284.05 million in 2023, which represents approximately 43% of its total IT revenue. Despite the fluctuations, foreign currency translation account increased from S$1.6 million in 2022 to $S3.6 million in 2023.

Multi-Chem stands at the intersection of growth and stability, offering investors not just a promising share price trajectory but also a sound foundation of profitability and strategic foresight.

About the Company
Multi-Chem provides printed circuit boards (PCB) manufacturing services, mainly precision drilling services to PCB fabricators. The company also distributes specialty chemicals and other related products and equipment to PCB fabricators. The company was founded on February 7, 1985, and is headquartered in Singapore.

Multi-Chem – Annual Report 2023

Disclaimer: ProsperUs Head of Content & Investment Lead Billy Toh doesn’t own shares of the company mentioned.

Billy Toh

Billy is deeply committed to making investment accessible and understandable to everyone, a principle that drives his engagement with the capital markets and his long-term investment strategies. He is currently the Head of Content & Investment Lead for Prosperus and a SGX Academy Trainer. His extensive experience spans roles as an economist at RHB Investment Bank, focusing on the Thailand and Philippines markets, and as a financial journalist at The Edge Malaysia. Additionally, his background includes valuable time spent in an asset management firm. Outside of finance, Billy enjoys meaningful conversations over coffee, keeps fit as a fitness enthusiast, and has a keen interest in technology.

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