Valuetronics - Maybank Kim Eng 2020-03-29: Approaching Crisis Valuations

VALUETRONICS HOLDINGS LIMITED (SGX:BN2) | SGinvestors.io VALUETRONICS HOLDINGS LIMITED (SGX:BN2)

Valuetronics - Approaching Crisis Valuations


Most risks appear priced in; BUY

  • We cut FY20-22E earnings by 2-23% as we factor in additional supply chain issues in FY20E, and demand uncertainty in FY21E.
  • While we see risks to our forecasts amid poor visibility, we believe most risks are priced in as Valuetronics (SGX:BN2) is trading at only 1.2x FY20E ex-cash P/E (near 1SD below long-term mean), not far from crisis valuations during the GFC and 2013 of -0.4x and -0.2x respectively.
  • Our ROE-g/COE-g Target Price falls to SGD0.82 as we roll forward to 1.5x FY21E P/B from 1.9x FY20E. BUY.
  • See attached PDF report for forecast changes and sensitivity analysis details.



Visibility is increasingly murky

  • Valuetronics updated that as at 23-Mar, 80% of its employees in China has resumed work. However, Valuetronics expects business sentiment to be uncertain in major markets such as US, Europe and China. See Valuetronics Announcements.
  • 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 For instance, Valuetronics’s automotive customer has withdrawn its guidance amid increasing supply-chain and end-demand uncertainties on 20-Mar.


But strong balance sheet helps fund 8% yield…

  • While Valuetronics has the balance sheet means to maintain HKD0.25 DPS in FY20-21, we factored a lower HKD0.22-0.23, pegged to 63% pay-out ratio, which is the FY16 high. Valuetronics expects its Vietnam expansion plans to be fully funded via cash.
  • Customers’ liquidity, leverage and coverage ratios also appear healthy. On 20-Mar, its automotive customer withdrew the remaining USD1.4b of its revolving credit facility to boost liquidity levels amid current uncertainties.


While ex-cash P/E is near crisis valuations



Read also






Lai Gene Lih CFA Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2020-03-29
SGX Stock Analyst Report BUY MAINTAIN BUY 0.82 DOWN 0.940



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