SINGAPORE (Feb 24): RHB is maintaining its “buy” call on Fu Yu, the manufacturer of precision plastic moulds, as it believes the counter is an attractive candidate for privatisation or takeover, with net cash position and zero debt.
“We also think it can weather through the current tough macroeconomic environment. In addition, it continues to trim costs and improve margins,” says analyst Jarick Seet.
In a Friday report, Seet says Fu Yu has a net cash of 14 cents per share, zero debt, strong cash generation capabilities and low capex requirements.
In addition, its NAV of 23 cents per share is significantly lower than the current market value, given peers like Broadway Industrial Group and Chasen Holdings were recently acquired at much higher valuations.
To recap, Fu Yu reported a 44.4% rise in NPAT to $5.6 million in 4Q16. A 1 cent dividend was declared, bringing total FY16 dividends to 1.5 cents, which represents a 6.8% FY16 yield.
Meanwhile, FY16 gross margin improved to 16.3%, from 15.9% a year ago.
“We expect margins to continue to rise going forward,” says Seet, “This is due the company’s ongoing cost-cutting measures and increased operational efficiencies, coupled with the switch towards higher margin projects.”
Shares of Fu Yu are up 0.5 cent to 21.5 cents.
