SINGAPORE (May 23): DBS Vickers likes Valuetronics as outsourcing for electronic manufacturing services (EMS) continues to win favour, supported by the company’s proven track record and robust financials.
Valuetronics is the integrated electronics manufacturing services (EMS) provider, whose extensive manufacturing capabilities span the entire EMS value chain - from procurement to engineering design and development, assembly and even supply chain support services, thus offering more value-add than traditional EMS players.
The push towards greater connectivity and smarter capabilities is set to drive the development and adoption of connectivity tools and applications, which has to open doors for integrated EMS players with a proven record such as Valuetronics.
Apart from new IoT-related product ramps, which are poised to drive earnings growth by 11.1% CAGR from HK$120 million ($21.4 million) in FY16 to HK$165 million in FY19F, business development efforts across the group’s sub-segments are currently underway. If successful, these could significantly enhance its long-term outlook.
“Given its record of strong cashflows and firm earnings outlook, we believe that Valuetronics deserves to at least trade at 8x CY17F ex-cash PE (discount to peers’ 9x),” says DBS which is valuing the stock at 95 cents in a Tuesday unrated report. A stable 20 HK cents dividend is also on offer.
Key risks include sustained weakness in the global economy and small customer base in Consumer Electronics segment, which could result in significant fluctuations in business performance.
Shares of Valuetronics are up 1 cent at 86 cents.
