Valuetronics - RHB Invest 2017-11-10: Riding On The Tech Manufacturing Boom

Valuetronics - RHB Invest 2017-11-10: Riding On The Tech Manufacturing Boom VALUETRONICS HOLDINGS LIMITED BN2.SI

Valuetronics - Riding On The Tech Manufacturing Boom

  • Valuetronics reported a stronger 2QFY18, with NPAT surging 33.5% YoY, slightly above our expectations. This was contributed by 45.7% YoY and 10.5% YoY revenue growth from its CE and ICE segments respectively. 
  • The company also has a healthy balance sheet with zero debt. Its net cash and financial assets stands at HKD713.1m. 
  • We expect this performance to continue for the remaining quarters of FY18. As a result, we raise our FY18 and FY19 NPAT estimates by 4%, resulting in a higher DCF-backed TP of SGD1.05 (from SGD0.93, 5% upside). Maintain NEUTRAL.



Superb growth from consumer electronics (CE) segment. 

  • The strong growth in Valuetronics’ CE segment in 2QFY18 (Mar) was mainly driven by smart light-emitting diode (LED) lighting products with Internet of Things (IoT) features. 
  • Management remains optimistic on the growth prospects of the smart LED lighting products, as IoT devices are becoming more popular. This led to its CE revenue to surge 45.7% YoY during the quarter.


In-car connectivity modules contributed mainly to Industrial & Commercial Electronics (ICE) business growth. 

  • Its ICE business grew 10.5% YoY, mainly contributed by the increase in demand from some of its existing customers, as well as new projects involving in-car connectivity modules used in the automotive industry. 
  • Going forward, we expect the ramp up of these products to continue for FY18, and expect this segment’s revenue growth to be around 10-12% pa.


Solid balance sheet with first interim dividend given. 

  • As at 2QFY18, Valuetronics had a healthy balance sheet with zero debt as well as net cash and financial assets of HKD713.1m. As a result, management has decides to reward shareholders with the first ever interim dividend of HKD0.07. 
  • We expect the total dividend yield of F18F to be around 4.5%.


Using cash pile for M&As. 

  • Previously, management mentioned that it aims to utilise the majority of its HKD627.5m cash pile for M&As. Valuetronics’ targets include downstream players, or horizontal businesses that fit and synergise with its existing business – which now boasts stronger fundamentals. 


Good growth sustained. 

  • Going forward, we expect this performance to continue for the remaining quarters of FY18 due to healthy growth drivers from both its businesses, especially its in-car connectivity modules, which are likely to increase due to the rising demand for new experiences and connectivity features within an automotive vehicle. As a result, we raise our FY18 and 19 NPAT estimates by 4%, resulting in a higher DCF-backed TP of SGD1.05. 
  • Due to a less than 10% upside to our TP, we maintain NEUTRAL call on this counter for its attractive dividends.
  • Key risks are the economic slowdown, forex and raw materials price fluctuations.




Jarick Seet RHB Invest | http://www.rhbinvest.com.sg/ 2017-11-10
RHB Invest SGX Stock Analyst Report NEUTRAL Maintain NEUTRAL 1.05 Up 0.930



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