VALUETRONICS HOLDINGS LIMITED (SGX:BN2)
Valuetronics - Bottom May Be Nearing
2HFY21 beat, but expect challenging FY22E; HOLD
- Valuetronics (SGX:BN2)’s 2HFY21 PATMI of HKD95.6m (+28% y-o-y) was ahead of our estimates, largely due to stronger than expected ICE momentum in 4QFY21.
- Although Valuetronics expects FY22 to be more challenging than FY21, we raise FY22-23E earnings per share forecast by 10-13%, as we believe the worst of customer allocation losses may be over.
- Our target price of S$0.60 for Valuetronics is based on 10.6x FY22E P/E (30% discount to SG-peers), from 10x blended FY21-22E previously. Maintain HOLD.
ICE strength offset CE weakness in 2HFY21
- Revenue rose 20.2% y-o-y to HKD1.19b, as industrial and commercial electronics (ICE) rose 36% y-o-y, benefitting from logistics and printing customers on the back of the COVID-19 driven e-commerce boom. This was also aided by the delayed switch over of the automotive customer to a new vendor for the US allocation of products.
- In contrast, consumer electronics (CE) was affected by the customer’s switch over to another supplier in ASEAN for its US-allocation, as well as weaker end-market sales. Gross margin improved 1ppt y-o-y to 16.9% due to favourable shift in product mix.
Worst of allocation losses could be over
- Valuetronics is expecting significantly lower FY22E expansion in Vietnam, we think the worst of customer allocation losses could be over, and this is reflected in our increase of FY22-23E earnings per share.
Vietnam expansion on track
- The construction of the Vietnam campus remains on lingering uncertainties from components shortages and COVID-19 demand risk.
- See
Gene Lih Lai CFA
Maybank Kim Eng Research
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https://www.maybank-ke.com.sg/
2021-05-31
SGX Stock
Analyst Report
0.60
UP
0.580
