Excerpts from analyst's report
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Valuetronics Chairman and MD Tse Chong Hing. He joined the Group in Nov 1996 as the Assistant to the then MD. Photo: annual report A better FY15 (Mar) than expected. Valuetronics marginally outperformed our FY15 estimates, with NPAT and gross profit increasing 0.9% and 1.4% to HKD149.2m and HKD331.4m respectively.
Growth was mainly driven by the HKD176.3m (+22.6%) rise in its industrial and commercial electronics (ICE) segment, which compensated for the slowdown in its consumer electronics (CE) business.
This was the result of a new customer and an increase in demand from some of its existing clients. In addition, FY15 GPM improved to 13.6% (FY14: 13.4%) due to a change in product sales mix for the financial year under review.
Respectable dividends for FY15. Valuetronics declared a total dividend of 20 cents per share, representing a payout of approximately 50% of net profit attributable to shareholders. While slightly below our estimates, it still represents a respectable 6.4% yield. Management has guided that 50% will not be the limit or maximum cap, and that the company will not hesitate to reward shareholders with higher dividends if Valuetronics will perform well in FY16.
Maintain BUY, an exciting FY16 ahead. Valuetronics’ strong cash flow generation is a key attraction, with cash balance increasing to HKD505.8m with zero debt on its balance sheet. In addition, the company has another HKD59m in “A” Grade USD-denominated bonds with an average maturity period of three years that it intends to hold till maturity.
Going forward, we remain bullish on Valuetronics, especially its ICE segment, which has already obtained a new major customer that ought to contribute more than 3% of its total revenue. In addition, on the CE front, we expect Koninklijke Philips NV (Philips) to list its lightning business, which will be a positive for Valuetronics. Maintain BUY with an unchanged DCF-backed TP of SGD0.64.
