Valuetronics Holdings Ltd (BN2.SI) is one of the top performers in our Asia Pacific Model Portfolio since December 2015 (see our posting ‘Valuetronics – Value for Money’). The provider of Electronic Manufacturing Service (“EMS”) has gained 63% since our first recommendation and is up 30% since the beginning of this year. [mepr-active membership=”1734″ ifallowed=”show” unauth=”message” unauth_message=”Please login or purchase a membership to view full text.”]
Valuetronics is a preferred choice for manufacturers of telecommunication, industrial, commercial and consumer electronic products. The global EMS industry is expected to grow at 6.2% annually to 621bn USD in 2019.
Valuetronics has strengthened and expanded its already robust ICE business segment with the entry into the growing automotive industry. The company is well positioned to benefit from the increasing demand for in-car connectivity products as more and more consumers wish to integrate smartphones and tablets into their vehicles nowadays.
With a workforce of around 2,600 employees, Valuetronics reported revenues of 1,6bn HKD (211m USD) and a profit before tax of 126m HKD (16m USD) in its nine months statement ending December 2016. An increase of 8% and 22% respectively compared to the same period a year ago.
For the fiscal year ending in in March 2016 revenues and profits were both down almost 20% on a year-on-year basis as a result of an exit from the low-margin mass market LED light bulbs business. The decline, however, was mitigated by the growth in the ICE segment. Valuetronics benefits today from a wider customer base. The company had cash and equivalents of 670m HKD (86m USD) at the end of December 2016, money which can be used for acquisitions and to buy back own shares.
Valuetronics shows a healthy balance sheet with an equity ratio of 51%, a moderate gearing ratio, and zero debts. Profit margins at 16% could improve to keep up with those in its peer industry.
Valuetronics’ shares are on a continuous uptrend since 2009 and gained more than 800% since. The company is still moderately priced at ten times earnings, compared to 18 times in its peer industry. Valuetronics has paid a dividend of 0.20 HKD for 2016, yielding almost eight percent based on the share price at year-end. Around 67% of Valuetronics’ share are in public hand and can be traded in Singapore and Germany.
Given the company’s strong fundamentals and a positive outlook for the global economy, we remain confident for another 20% increase in the share price until the end of this year.
AIS Rating: ★★★★☆
| 2011/12 | 2012/13 | 2013/14 | 2014/15 | 2015/16 | 2016/17 Q1-3 only |
|
|---|---|---|---|---|---|---|
| EPS (HKD) | 0.36 | 0.22 | 0.4 | 0.4 | 0.32 | 0.29 |
| Change | 6% | -39% | 82% | 0% | -20% | 20% |
| P/E | P/E SECTOR |
P/B | P/CF | Equity Ratio* |
ROE | Debt/ Equity** |
Div YLD |
|---|---|---|---|---|---|---|---|
| 10 | 18 | 2 | 8 | 51% | 16% | 96% | 3.3% |
* Equity / Total Assets, ** Total Liabilities / Equity
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