SINGAPORE (Aug 17): RHB has maintained its “buy” call for Fu Yu Corp, the provider of precision injection moulding services, with a target price of 29 cents. This comes as 2Q16 gross margins improved to 16.4% from 14.2% as compared to a year ago.

RHB analyst Jarick Seet says that gross margins will show further improvements as Fu Yu right-sizes its China operations as well as improve its utilisation rate by securing more customers and projects with better margins.

“We believe Fu Yu will be one of the best performing manufacturers for FY16, despite the difficult macro outlook,” says Seet.

Looking ahead, the research house expects a better 2H16 for the firm if the USD remains stable or appreciates in the same period, given that more than 80% of Fu Yu’s revenue is in USD.

Beginning this year, the firm has instituted a minimum 50% NPAT payout dividend policy. As at 2Q16, the firm has paid out an interim dividend of 0.25 cent and Seet believes that more dividends will be forthcoming in 2H16, with a yield of 9.5% for FY16.

As at 3.20pm, shares of Fu Yu Corp were up 2.7% at 19.1 cents.