Valuetronics - RHB Invest 2016-08-15: ICE To Lead Growth Going Forward

Valuetronics - RHB Invest 2016-08-15: ICE To Lead Growth Going Forward VALUETRONICS HOLDINGS LIMITED BN2.SI

Valuetronics - ICE To Lead Growth Going Forward

  • Going forward, we believe that Valuetronics’ industrial and commercial electronics (ICE) segment will continue to be the main driver of its growth.
  • However, we do expect the segment’s margins to taper down, as the automotive segment’s volume picks up in FY17F-18F (Mar). 
  • The company had a strong net cash position of HKD744.9m (as at 1QFY17) that will enable it to weather any downturn in the economy. However, as its share price is now close to our SGD0.54 TP (2% upside) and coupled with the tough macroeconomic environment, we remain NEUTRAL on the stock.


ICE to lead growth going forward. 

  • We believe that the company’s ICE segment should continue to deliver double-digit growth for FY17F-18F. The turnover of Valuetronics’ ICE segment grew 15.8% YoY in 1QFY17, as it rode on the new revenue stream from the automotive industry, which further extended the breadth of the segment. 
  • Management shared that it is likely to continue exploring more opportunities within the automotive sector, which has stronger visibility and scalability (despite the lower margins) compared to other ICE projects.


Strong balance sheet to weather storm ahead. 

  • With a net cash position of HKD744.9m, we believe Valuetronics has a strong balance sheet that will enable it to weather any potential downturn ahead, in such a challenging macroeconomic environment. 
  • We also view management likely to be able to also draw down from its cash hoard to continue to reward shareholders with attractive dividends. 
  • Downside risks to our call are an economic recession and slowdown, while upside risks are an increase in customers and higher-margin projects.


Maintain NEUTRAL with a DCF-backed TP of SGD0.54. 

  • As Valuetronics’ share price is close to our TP and coupled with the tough macroeconomic environment ahead, we remain NEUTRAL on the stock. 
  • Our TP of SGD0.54 implies 10x FY17F P/E.




Jarick Seet RHB Invest | http://www.rhbinvest.com.sg/ 2016-08-15
RHB Invest SGX Stock Analyst Report NEUTRAL Maintain NEUTRAL 0.540 Same 0.540


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