SINGAPORE (May 30): UOB Kay Hian is downgrading Valuetronics to a “hold” on valuation grounds with entry and target prices of 72 cents and 80 cents respectively as most positives have been priced in.
Valuetronics posted strong 4Q numbers, which brought FY17 net profit 27.9% higher to HK$154.1 million ($27.4 million), thanks to higher demand in the consumer electronics and industrial & commercial electronics segments.
For FY17, sales grew 16.5% on year, largely due to increased orders from existing customers.
Consumer electronics (CE) sales rose 19.7% to HK$987.1 million in FY17, driven by new IoT products such as smart lighting. Industrial and consumer electronics (ICE) segment revenue rose by 14.1% to HK$1.3 billion in FY17 due to new orders from existing customers.
In a Tuesday report, analyst Nicholas Leow says Valuetronics should continue to see double-digit growth in FY18. Growth should be driven by sales growth of wireless lighting product with smart control features and by the automotive segment which UOB estimates formed about 10-15% of total sales for FY17.
Valuetronics is also in the process of being audited by another car brand with approval expected by late-FY18. “We have forecasted 11% revenue growth rates each for the ICE and CE segments in FY18,” says Leow.
As of end March, the group had net cash of HK$752.9 million or about 39% of current market capitalisation. Valuetronics has no debt. The company offers a dividend of HK$0.20/share for FY18, implying a yield of 4.5% which Leow says is “attractive and sustainable”.
Shares of Valuetronics are trading 1 cent lower at 80 cents.
