SINGAPORE (Sept 17): YHI International, the global distributor of automotive and industrial products, listed on the Mainboard of Singapore Exchange (SGX) on July 2003.
It is also a trust brand name in alloy wheels manufacturing as an Original Design Manufacturer (ODM). The group’s presence spans 100 countries through 33 subsidiaries and one associated company. Currently, the group serves more than 5,000 customers globally.
CGS-CIMB likes YHI, who distributes tyres, alloy wheels, automotive and industrial batteries, as well as golf and utility buggies.
The key tyre brand the group carries is Yokohama. But it also has its own tyre brand, Neuton Tyres.
In FY17, the distribution business accounted for 73% of revenue, 80% of operating profit and generated an operating profit margin of 3.0%. By geography, Asean accounted for 43% of FY17 distribution revenue.
On the other hand, the group’s manufacturing business accounted for the remaining 27% of its FY17 revenue, 20% of operating profit and generated an operating profit margin of 2.0%.
In an unrated report on Friday, analyst William Tng says, “YHI incurred losses in its manufacturing business in China due to restructuring costs as it ceased operations in Shanghai in FY17.”
The group now has three alloy wheels manufacturing plants located in Suzhou (China), Taoyuan (Taiwan) and Malacca (Malaysia), with a total production capacity of 2.6 million units per annum. It also has its own proprietary alloy wheel brand, Advanti Racing.
Due to an increase in aluminium prices globally, the group has guided that it expects its manufacturing business to experience margin erosion in 2H18. It also thinks that the tariffs announced by the US could possibly have a negative effect on its wheel manufacturing business in China.
Meanwhile, the group expects its distribution business to continue facing intense competition in prices, due to low rubber prices and the prevailing overcapacity in the tyre market globally.
“YHI has also guided that it will continue to execute its “3R” reduction policy to reduce inventory, reduce account receivables and reduce operating costs,” says Tng.
Although the group does not have a dividend policy, it has paid dividends in the last five years. As at end-FY17, its net gearing was 0.12 times.
As at 11.05am, shares in YHI are trading at 41 cents, with a historical FY17 price-to-book ratio of 0.48 times, with a dividend yield of 3.7%.
