Here's the most surprising fact in MTQ's earnings results

PATMI jumped by 10% in 2QFY14.

According to OSK, MTQ delivered healthy 2QFY14 results, with PATMI rising 10% y-o-y as expected. What surprised OSK was the magnitude of cost-cutting, with overheads falling 16.5% q-o-q, which should augur well for future quarters’ profitability.

Here's more from OSK:

High-quality earnings. MTQ’s 2QFY14 revenue rose 62% y-o-y but fell 31% q-o-q to SGD64.7m, in line with management’s guidance.

Gross margins jumped to 36.6% from 29.9% in 1Q14, mitigating much of the revenue fall. The company’s SGD5.5m bottomline this quarter met our earnings preview published a week ago. It also declared a 2-cent dividend, up 25% y-o-y after factoring in the share split.

Strong cash generation yields SGD3.59 DCF-value. MTQ posted SGD19.1m operating cash flow in 1H14, compared with SGD8.8m in 1H13. Driven by higher expected profitability, our DCF-value for MTQ rises to SGD3.59/share.

In addition, as management “does not intend to sit on a large cash pile”, it will likely return excess cash to shareholders as dividends if no acquisitions are forthcoming.

Rapid cost-cutting augurs well for quarters ahead. MTQ’s overheads fell by 16.5% q-o-q to SGD16.7m, a much faster pace than we had expected. We expect revenue to recover to around SGD70m per quarter going forward, and project the gross profit increase to flow directly through the lower overheads to the bottomline.