FU YU CORPORATION LTD
F13.SI
Fu Yu Corp - Safe Haven Full Of Cash
- Fu Yu would continue to focus on profitability amid the challenging outlook.
- It declared a total DPS of SGD0.02 in FY15, representing a 14.1% dividend yield, but still generated an additional SGD23m worth of cash, building up its net cash position to SGD0.14/share, equivalent to the current share price.
- Going forward, management will likely continue to increase dividends gradually as it transfers excess cash back from its subsidiaries.
- With more right sizing exercises to improve margins, we maintain our Conviction BUY on Fuyu with a SGD0.29 TP (104% upside).
Focusing on profitability.
- Despite declining revenue for the past three consecutive years, management has remained focused on profitability by performing major right-sizing and cost-cutting exercises.
- Going forward, management expects revenue to likely be at the bottom but it would continue to focus on profitability, especially with the challenging outlook ahead.
- We continue to expect GPM to improve in FY16, like it did in FY15.
Net cash = market cap and 15.8% FY16F dividend yield.
- Despite paying out SGD7m worth of dividends earlier, Fu Yu’s cash level still increased by 23% YoY to SGD102.9m.
- Going forward, management is keen to reward shareholders with increased dividend payouts, while it continues to transfer excess cash back from its subsidiaries overseas. We forecast a robust 15.8% FY16 dividend yield.
Key risks:
- USD depreciation and economic recessions.
Maintain Conviction BUY.
- Fuyu is a safe haven full of cash, with strong cash flow generation and high dividend yields. Management is also exploring share buyback options.
- Coupled with earnings beating estimates, we think that Fuyu is a no brainer in tough markets and maintain our Conviction BUY, with a DCF-backed TP of SGD0.29, implying 12.8x FY16F P/E.
Jarick Seet
RHB Invest
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http://www.rhbinvest.com.sg/
2016-02-29
RHB Invest
SGX Stock
Analyst Report
0.29
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0.29
