Alco Holdings Ltd (0328.HK), a Bermuda incorporated investment holding, is a manufacturer of Consumer Electronics and Electronics Manufacturing Services (EMS). Founded 1968 the company is headquartered in Hong Kong and listed on the Main Board of The Hong Kong Stock Exchange since 1992. The company is among Forbes’ list of ‘Best Small Asian Companies Under A Billion’.
Through its subsidiaries Alco is engaged in designing and manufacturing consumer electronic products such as personal computing, infotainment, telecommunication and audio-visual (AV) products. The company is furthermore manufacturing plastic and packaging products and is involved in property investments and software development activities.
99% of the revenues come from North America, where the largest customer contributes around 92% of Alco’s total sales, followed by Asia (0.8%) and Europe (0.1%). Alco is selling in license under the established brand ‘Venturer’ in North America and has a good commanding market share in entry level personal computing products and tablets in this market. For Europe and Asia the company is lacking of such a dedicated branding strategy yet.
With massive investments in production and automation Alco wants to improve productivity and quality in order to launch technologically more advanced products such as a recently launched new series of tablets and personal computing products that have become important growth drivers recently. Alco’s audio-visual products such as sound bar systems, amplifiers, Bluetooth wireless speakers, DVD players, Blu-ray players and home theatre systems remain an important foundation and source of stable revenue for the company.
With a staff of around 1,700 employees the company generated revenues of 2.879bn HKD and a profit of 506m HKD in its fiscal year ending March 2016, an increase of 12% and 343% respectively compared to 2015. Excluding the effect of the disposal of three properties (221m HKD) the profit increased still a healthy 149%. Without this onetime effect, the company is currently priced at 6.9 times its earnings, much better than its industry peers. Alco will pay a total dividend of 0.96 HKD per share, a yield of more than 28% for the fiscal year 2016. The stock is in an uptrend since 2014 with a gain of more than 210%. The high dependency from one single customer remains a risk. Nevertheless we see potential growth perspectives for the company in a gradual recovering US economy and in a better penetration of the European and Asian market with technologically advanced products.
AIS Rating: ★★★☆☆
| 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | |
|---|---|---|---|---|---|---|
| EPS (HKDcents) | 47.6 | 13.8 | 10.1 | -3.3 | 19.7 | 87.3 |
| Change | 6.7% | -71% | -27% | -133% | 697% | 343% |
| P/E | P/E Industry |
P/B | P/CF | Equity Ratio |
ROE | Debt/ Capital |
Div YLD |
|---|---|---|---|---|---|---|---|
| 3.9 | 26 | 1 | 3.6 | 67% | 26% | 50% | 10.7% |
