Valuetronics - Maybank Kim Eng 2020-11-21: Waiting Mode; Maintain HOLD

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

Valuetronics - Waiting Mode; Maintain HOLD


Earnings recovery delayed: HOLD, prefer Venture Corp




Customers switching over to be fully felt in FY22E

  • Disruptions caused by COVID-19 have delayed automotive and PCBA customers’ plans to switch US allocations to other suppliers from Valuetronics from 1HFY21 to 2HFY21. As such, the full effect of the allocation losses would not be felt until FY22E, which will in turn delay earnings recovery.
  • In our view, visible signs of earnings recovery is a key rerating catalyst, as these are indicators that present headwinds have passed. Valuetronics expects prospects beyond FY21 to be highly uncertain, due to COVID-19 and US-China trade tensions.


Vietnam is a long-term growth driver

  • We forecast Valuetronics's earnings to bottom in FY22E before growth resumes in FY23E. We expect construction of the Vietnam plant to be completed in CY22. Valuetronics sees this plant as a long-term growth driver.
  • Valuetronics has been expeditiously expanding its Vietnam capacity to cater to the needs of customers who want to diversify production to Vietnam from China. However, we believe the slope of Valuetronics’s recovery will be uncertain, as this depends on winning new customers to rebuild its revenue base, and the profile of projects secured.

Valuation and risks





See also report: Technology Stocks - Maybank Kim Eng 2020-11-21: Riding A New Wave Of 5G, IoT, AI & EV; Upgrade to POSITIVE.




Gene Lih Lai CFA Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2020-11-21
SGX Stock Analyst Report HOLD MAINTAIN HOLD 0.580 SAME 0.580



Advertisement



MOST TALKED ABOUT STOCKS / REITS OF THE WEEK



loading.......



ANALYSTS SAY


loading.......