Fu Yu Corp - RHB Invest 2016-02-29: Safe Haven Full Of Cash

Fu Yu Corp - RHB Invest 2016-02-29: Safe Haven Full Of Cash  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 | http://www.rhbinvest.com.sg/ 2016-02-29
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