Valuetronics *Official* (SGX: BN2)

Shion

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With a 7.5% dividend yield and strong net cash position, Valuetronics is one to watch: CGS-CIMB

With a 7.5% dividend yield and strong net cash position, Valuetronics is one to watch: CGS-CIMB

https://www.theedgesingapore.com/ca...cash-position-valuetronics-one-watch-cgs-cimb

SINGAPORE (Mar 11): Integrated electronics manufacturing services provider Valuetronics has seen its share price tumble by some 25% since the Covid-19 outbreak.

This hardly came as a surprise to market watchers, as the group’s two factories in Huizhou, China encountered revenue losses and supply chain disruptions.

The two factories account for more than 90% of the company’s production, save for a leased site in Vietnam which constituted less than 10%.

In a Tuesday report, CGS-CIMB Research analyst Ngoh Yi Sin notes that although operations have since resumed, the factories’ production levels have yet to hit pre-CNY levels due to the shutdown of cities and limited transportation facilities.

The management, too, has braced itself for lower 2HFY2020 revenue on the back of disruption to originally planned delivery schedules.

Segmentally, Ngoh has detected a mixed near-term outlook for businesses of Valuetronics.

“Its consumer lifestyle and smart lighting businesses, which formed 30% and less than 10% of 2QFY2020 topline respectively, continue to see tailwinds from increasing market penetration and new product launches at multiple price points,” says Ngoh.

“Covid-19 uncertainty has, however, impacted consumer spending, causing a decline in China online sales for grooming products,” she adds.

The group’s industrial and commercial electronics (ICE) segment is likely to benefit from higher telecommunication and printer demand, which constitute some 30% of the group’s revenue. This, according to Ngoh, could mitigate the impact of lower sales from the auto segment.

Yet, Ngoh identifies strengths in the counter which investors should pay attention to. For instance, Valuetronics boasts a “robust” balance sheet with zero debt, and HK$1.03 billion ($184.3 million).

Valuetronics also has a consistent track record of positive free cashflow generation, which the brokerage thinks could help buffer the group against macroeconomic challenges.

“We expect the group to maintain its 25 HKcts DPS over FY2020-2022F, translating into 7.5% dividend yield. This, coupled with inexpensive valuation of 7.7x FY21F P/E, could also make it an attractive M&A target, in our view,” says Ngoh.

Ngoh adds that the management is not intending to tap on borrowings for its expansion into Vietnam, which could amount to some HK$170 million inclusive of land use rights.

CGS-CIMB is reiterating its “hold” call on Valuetronics, with a target price of 62 cents, representing an upside of 5.9% for the stock.

As at 4.42pm, shares in Valuetronics are trading one cent lower, or 1.65% down, at 59.5 cents.
 

Shion

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Buying opportunity for investors as Valuetronics hovers near 'crisis valuations'

Buying opportunity for investors as Valuetronics hovers near 'crisis valuations'

https://www.theedgesingapore.com/ca...rs-valuetronics-hovers-near-crisis-valuations

SINGAPORE (Mar 30): Year to date, Valuetronics’ share price has plunged some 42% in light of the escalating Covid-19 situation which has affected business sentiment adversely.

However this might be a blessing in disguise for investors, according to Maybank Kim Eng Research. The brokerage argues that most risks appear to be already priced in for the stock, suggesting a limited downside barring any further escalations or complications.

In a Monday report, analyst Lai Gene Lih notes that the counter is trading at only 1.2 times its FY2020E ex-cash price-to-earnings (P/E), not far from crisis valuations during the global financial crisis and an especially difficult year in 2013. These were the only two times the group had negative valuations to its name.

While Lai attests that this poses an attractive buying opportunity, the brokerage has slashed its FY2020-FY2022E earnings by some 2-23% to factor in additional supply chain issues and demand uncertainty.

“Valuetronics expects business sentiment to be uncertain in major markets such as the US, Europe and China,” says Lai. “Valuetronics noted that since last week, some suppliers and end-customers in various countries have temporarily shut down to halt the spread of Covid-19.”

“We note that customers are beginning to turn cautious. For instance, its automotive customer has withdrawn its guidance amid increasing supply-chain and end-demand uncertainties on Mar 20,” he adds.

To be sure, Lai acknowledges that the current uncertain outlook will impact the group’s products in the smart lighting, consumer electronics, automotive and various industrial value chains.

Yet, the group’s robust balance sheet could offer some comfort to investors. With a cash position of HK$1 billion and no debt, Lai says that Valuetronics has the means to maintain a distribution per share (DPS) of 25 HK cents for the next two years.

“Valuetronics expects its Vietnam expansion plans to be fully funded via cash. Customers’ liquidity, leverage and coverage ratios also appear healthy,” shares Lai, adding that the group has a strong track record of generating respectable cash flows on the back of consistent profitability and solid working capital management.

This translates to an attractive 8% dividend yield for the group, although the brokerage has factored a lower DPS in the range of 22-23 HK cents pegged to a 63% pay-out ratio, which is also the group’s FY2016 high.

Looking ahead, Lai says that Valuetronics’ acquisition of surface mount technology (SMT) machines in FY2018 is likely to pay off, as these will enable the group to cater to both new and existing customers.

Other share price drivers for the counter include better-than-expected growth of business segments such as IOT bulbs and in-car connectivity modules, new customer acquisitions in industrial and commercial electronics, as well as operating leverage attained from increased production.

On the flipside, Lai is quick to caution investors about key risks for the group which include weaker-than-expected end-demand for customer or industry-specific products, cost increases for labour and materials, as well as unforeseen pricing erosion for key products.

Maybank is reiterating its "buy" call on Valuetronics with a target price of 82 cents, representing a 71% upside for the stock.

As at 11.35am, shares in Valuetronics are trading one cent lower, or 2% down, at 50 cents. This translates to a price-to-book (P/B) ratio of 0.98 times and a dividend yield of 8.2% for FY2020 according to Maybank valuations.
 

Muppy87

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I see the dividends is in HKD, first time getting a stock with dividends in foreign exchange. Do you all prefer to receive as HKD or SGD? Was thinking to receive in HKD then get POSB to convert due to lower fees.

Anyone can advise me which way incurs least fees?
 

henrylbh

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I see the dividends is in HKD, first time getting a stock with dividends in foreign exchange. Do you all prefer to receive as HKD or SGD? Was thinking to receive in HKD then get POSB to convert due to lower fees.

Anyone can advise me which way incurs least fees?

It will be paid in S$ by CDP.
 

Shion

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Valuetronics FY20 earnings fall 10.3% to $32.5 mil on lower customer demand due to 'toughest busines

Valuetronics FY20 earnings fall 10.3% to $32.5 mil on lower customer demand due to 'toughest business environment' since history

https://www.theedgesingapore.com/ca...03-325-mil-lower-customer-demand-due-toughest

SINGAPORE (June 3): Valuetronics Holdings, the provider of electronics manufacturing services (EMS), announced a 10.3% y-o-y decline in FY20 earnings to HK$178.9 million (S$32.5 million) from HK$199.5 million. This is attributable to an overall lower customer demand owing to the global Covid-19 pandemic, escalating Sino-US trade tensions, and an overall global economic downturn.

In a statement on Wednesday, the company says it is encountering the “toughest business environment” since its operating history.

A final dividend of 14 HK cents per share has been proposed.

Including the HK 6-cent interim dividend paid out to shareholders in December 2019, the full dividend for FY20 amounts to 20 HK cents per share, or 48.5% of the net profit attributable to shareholders. This remains in line with the company’s formal dividend policy of paying out between 30% to 50% of net profit as normal dividends to shareholders.

Group revenue for FY20 fell 16.8% y-o-y to HK$2.35 billion from HK$2.83 billion.

Gross profit declined 15.7% to HK$362.8 million, with gross profit margin up by 0.2 percentage points to 15.4% for FY20 attributable to a change in sales mix for the year under review.

Revenue from its Consumer Electronics (CE) segment fell 21.1% to HK$916 million. Revenue from its Industrial and Commercial Electronics (ICE) segment declined 13.7% y-o-y to HK$1.44 billion.

The decline in both segments are mainly due to the slowdown in demand from customers.

Valuetronics’ other income fell 7.5% y-o-y to HK$24.7 million mainly owing to the increase in interest income.

Selling and distribution expenses fell by 36.5% to HK$26.3 million on the back of lower commission expenses, and the write back of provision of sales returns and claims amounting to some HK$4.3 million.

Administrative expenses fell by 7.4% to HK$164.1 million due mainly to cost control measures.

As at March 31, cash and cash equivalents stood at HK$1.05 billion.

Looking ahead, the company says outlook for FY21 is highly uncertain on the back of the Covid-19 pandemic and the Sino-US trade tensions, and it expects “significantly lower” financial results for the year.

“With COVID-19 pandemic and the Sino-US trade tensions, the outlook for FY2021 is highly uncertain. This is the toughest business environment we have faced in our operating history and while we try to mitigate its impact, our FY2021 financial results will be adversely affected,” says Ricky Tse Chong Hing, chairman and managing director of Valuetronics.

“Nevertheless, I have confidence in my team and our operating discipline. Our strong balance sheet has allowed us to build up our Vietnam capacity quickly and this will help us to cater to our customers’ changing supply chain needs,” he adds.

Valuetronics shares closed 3 cents higher, or 4.6% up, at 68 cents on Tuesday.
 

Shion

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Extract from Lim & Tan Daily Review 03/06/2020

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leesn74

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Reviving this discussion now after 6 straight sessions sell down, VHL is now 15% below its baseline. More buying interest as analyst believe electronic stocks will remain strong months to come and recently announced final dividend

RSI of 39 did also indicate significant level of oversold.
 

Nyan

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0.11 Debt to asset ratio. profit increasing over the years. Seems like a great stock but the key question is what price to enter.
 

Shingoz

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Am looking for penny stock to buy and my search leads me here. Good cash flow, i think the price is quite stable now after a small sell-out. Pressure from US-Sino relationship.

Anyone looking at this too?
 

Shion

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Valuetronics a valuable counter to look at, says Maybank Kim Eng Research

Valuetronics a valuable counter to look at, says Maybank Kim Eng Research

https://www.theedgesingapore.com/ca...le-counter-look-says-maybank-kim-eng-research

Maybank Kim Eng Research has taken a renewed liking for electronics and manufacturing services provider, Valuetronics.

"We believe value has emerged following a 22% share price correction in Value’s share price since it announced its FY2020 results,” says analyst Lai Gene Lih in a September 29 note.

“We believe a key risk is we may have underestimated the rate of earnings decline in FY21E, or overestimated the rate of recovery in future years,” she adds.

For its FY2020 ended March 31, the company had posted a 10.3% year-on-year decline in its earnings to HK$178.9 million ($31.4 million). This follows lower customer demand due to a combination of factors such as the Covid-19 pandemic, escalating US-China trade tensions and an overall global economic downturn.

Still, the recent correction in Valuetronics’ share price has pushed Lai to upgrade her call on the counter from “hold” to “buy” at a target price of 66 cents. This is up 29% or 13 cents from her previous 53 cent call.

Lai’s liking for the counter also stems from its compliance with applicable laws and regulations on the environment, anti-competitive behaviour and requirements on health and safety.

For instance, it has achieved an ISO 14000 Environmental Management accreditation since 2008, and it plans to obtain the accreditation in 2021 for its leased plant in Vietnam.

Meanwhile, Valuetronics has a dedicated whistleblowing hotlines and reports are escalated to senior management immediately. It also has measures to ensure that information of internal and external stakeholders are kept confidential, Lai observes.

She also notes that it is “an equal-opportunities employer” in terms of its treatment to both its staff and suppliers.

As at 3.52pm, shares of Valuetronics were flat at 56.5 cents.
 

Perisher

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anyone got 5 year revenue and earnings chart?
I see the share price declined significantly since 2018 peak of $1.08.
 
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