Skip to content
Alpha Edge Investing

Alpha Edge Investing

"Investors operate with limited funds and limited intelligence, they don’t need to know everything. As long as they understand better than others, they have an edge.” – George Soros

  • Home
  • Earnings Updates/ Corporate Actions
  • Research – Equities
  • Research – Fixed Income/ Bonds
  • Research – Unit Trust/ ETF
  • News
  • My Opinions/ Views
  • Others
  • About Me
  • Contact
  • Disclaimer
  • Community and Support Forums
  • Toggle search form

UOBKH: Valuetronics – HOLD TP $0.52

Posted on June 7, 2022 By alanyeo No Comments on UOBKH: Valuetronics – HOLD TP $0.52

FY22: Above Expectations, But Remains Cautious On Its Outlook

VALUE’s FY22 net profit of HK$114m (-39% yoy/+1% hoh) was above our expectations,
forming 115% of our full-year estimate, due to a lower-than-expected revenue decline.
VALUE’s outlook remains cautious as it expects the ripple effect of the supply chain
bottlenecks to last beyond 2022. Other uncertainties include the COVID-19 pandemic,
the Russia-Ukraine conflict and US-China trade tensions. We raise our FY23 EPS by 8%.
Maintain HOLD and target price of S$0.52.

RESULTS

• Results above expectations. Valuetronics’ (VALUE) FY22 net profit of HK$114m (-39%
yoy) was above our expectations, beating our estimate by 15%. The beat was due to a
lower-than-expected revenue decline in 2HFY22. Revenue fell 11% yoy due to severe
shortages of certain key electronic components that affected VALUE’s ability to meet
orders. Gross margin fell 3.3ppt to 13.6% due to: a) higher component prices caused by
tight supply, and b) China’s increased labour and operating costs, under an appreciating
renminbi.

• The ICE segment’s revenue declined due to its customer switching suppliers and a
shortage of components. VALUE’s industrial and commercial electronics (ICE)
segment’s revenue decreased 17.5% yoy to HK$1,320.5m in FY22 (FY21: HK$1,600.8m)
due to a significant drop in sales caused by its auto customer switching its production over to
another vendor in North America. Furthermore, the shortage of key electronic components
also affected order fulfilment for certain ICE customers. On the consumer electronic (CE)
front, revenue rose by 3.8% to HK$706.9m in FY22 (FY21: HK$680.7m), mainly due to a
rebound in orders from smart lighting customers.

• Cautious outlook due to potential headwinds. VALUE remains cautious on its outlook as
it expects the ripple effect of the supply chain bottlenecks to last beyond 2022. VALUE
also anticipates potential headwinds from: a) the component shortages, b) the COVID-19
pandemic, c) the Russia-Ukraine conflict, and d) US-China trade tensions.

• Proposes interim dividend of 4 HK cents/share. VALUE has recommended a final
dividend of 10 HK cents/share for 2HFY22. Together with the interim dividend of 4 HK
cents/share for 1HFY22, the total dividend amounts to 14 HK cents/share (vs 21 HK cents
in FY21). This represents a payout ratio of 53%.

STOCK IMPACT

• Vietnam expansion on track. Even with the ongoing COVID-19 pandemic, VALUE’s
expansion in Vietnam has remained on track. VALUE’s newly constructed Vietnam campus
in Vinh Phuc Province has commenced mass production for three customers in the last
quarter of FY22, following the successful completion of ISO and customer audits. These
mass production projects will serve as a reference for other customers on the readiness and
scalability of the Vietnam campus under VALUE’s regional manufacturing footprint strategy
which targets the diversified needs of global customers.

• Trial production for new ICE customers. VALUE is preparing for the trial production for its
newly acquired ICE customers, including a hardware provider customer for retail chain stores
and a customer providing cooling solutions for high performance computing environments,
which is expected to contribute revenue in FY23. Meanwhile, the revenue rebound in the CE
segment that was seen in FY22 is not expected to continue in FY23 due to lower customer
forecasts and the shortage of components.

EARNINGS REVISION/RISK

• We raise our FY23-24 earnings forecasts by 8%, after increasing our revenue
assumptions by 13% to account for an increase in ASP to pass on extra input costs. On
the other hand, we have reduced our gross margin assumption by 0.1ppt to 13.7%/13.6%
for FY23/FY24. This is to account for the rising production costs due to the shortage of
components and increased labour costs in China.

VALUATION/RECOMMENDATION

• Maintain HOLD and target price of S$0.52, pegged to a peers’ average of 11x PE
(reduced from 12x due to sector de-rating) for FY23.

SHARE PRICE CATALYST

• Additional customers in the new sectors.
• Higher-than-expected dividends and potential M&As.

Valuetronics_Holdings-_FY22-_Above_Expectations_But_Remains_Cautious_On_Its_OutlookClick here to Download Full Report in PDF

Share this:

  • Click to share on Twitter (Opens in new window)
  • Click to share on Facebook (Opens in new window)
  • Click to share on LinkedIn (Opens in new window)
  • Click to share on Telegram (Opens in new window)
  • Click to share on WhatsApp (Opens in new window)
Research - Equities Tags:Valuetronics

Post navigation

Previous Post: UOBKH: Online Travel Agencies – China (Overweight)
Next Post: UOBKH: Malaysia REITs (Overweight)

Related Posts

KE: Singapore Technology (Positive) – Venture, AEM, UMS, Frencken, Aztech, Valuetronics Research - Equities
RHB upgrades Valuetronics to ‘neutral’ as it sees worst to be over News
Analysts see headwinds ahead for Valuetronics, DBS cuts target price Research - Equities
CIMB: Valuetronics Holdings Ltd – Non Rated Research - Equities
DBS: Valuetronics Holdings – HOLD TP $0.51 (Previous $0.55) Research - Equities
KE: Valuetronics – HOLD TP $0.50 Research - Equities
CIMB: Valuetronics Holdings Ltd – Ceasing Coverage Research - Equities
UOBKH: Valuetronics – HOLD TP $0.52 Research - Equities
DBS: Valuetronics Holdings HOLD S$0.55 (4% downside) (Previous $0.60) Research - Equities
CIMB: Valuetronics Holdings Ltd – Reduce TP $0.533 (Previous $0.504) Research - Equities
DBS: Valuetronics Holdings Ltd – HOLD TP $0.60 Research - Equities
DBS: ASEAN Technology – AEM, Aztech, Frencken, Fuyu, Nanofilm, UMS, Valuetronics, Venture, Globetronics, Inari Amertron, Malaysia Pacific Ind, Unisem Research - Equities

Leave a Reply

You must be logged in to post a comment.

Login

Log In
Register Lost Password
Get new posts by email
Chat on WhatsApp
  • Earnings Updates/ Corporate Actions
  • My Opinions/ Views
  • News
  • Others
  • Research – Equities
  • Research – Fixed Income/ Bonds
  • Research – Unit Trusts/ ETF

Copyright © 2023 Alpha Edge Investing.

Powered by PressBook Grid Blogs theme