SINGAPORE (June 12): Maybank Kim Eng Research is keeping its “buy” recommendation on Valuetronics with an unchanged target price of 99 cents – implying an upside of more than 50% from its current trading price.
A Hong Kong-based electronics manufacturing services provider with two facilities in China, Valuetronics has found itself caught in the middle of escalating tensions between US and China.
Since late-April, Valuetronics’ share price has fallen some 10%, in part due to the US-China trade war.
Analyst Lai Gene Lih believes Valuetronics now offers “compelling valuations”, with the risks already priced in.
The way Lai sees it, Valuetronics’ expansion into Vietnam could help to insulate the group from the US-China trade war.
“Valuetronics is keen on expanding its Vietnam capacity to help customers bypass [the trade] tariffs, and most customers are stable or experiencing growth,” Lai says in a report on June 10.
In addition, Lai forecasts dividend yields of 7-8% for FY20-22E, which he says should provide share price support.
“Valuetronics has a strong track record of stable gross margins, and management has guided for this to be stable in the near term,” says Lai.
“We believe valuation is compelling based on the upside to our target price for a company that is expected to sustain its decade long track record of double-digit ROEs during our forecast period,” he adds.
As at 3pm, shares in Valuetronics are trading half a cent lower at 64 cents. This implies an estimated price-to-earnings (PE) ratio of 8.5 times and a dividend yield of 6.5% for FY20E.
