SINGAPORE (Nov 14): RHB has maintained its “buy” call on Fu Yu with a target price of 29 cents while highlighting the stock as an “attractive privatisation/takeover candidate”.

This comes after the manufacturer and supplier of high-precision injection molds and plastic parts on Friday released its financial statement last Friday for 3Q/9M16, declaring a second interim dividend of 25 cents and an improved 9M gross margin of 2 percentage points to 16%.

In a Monday note, analyst Jarick Seet says RHB continues to like Fu Yu given its “improving core business, undemanding valuations and attractive dividend yield of 7.9% in FY16F”.

He also expects better earning results next quarter, especially if the USD strengthens or if ASEAN currencies experience devaluation in future, as the company’s revenues are mainly USD denominated.

“Fu Yu has a strong balance sheet and cash flow generation abilities given its net cash of 0.13 cents per share, zero debt and low capex requirements. In addition, its NAV of 22 cents per share – of which most of its fixed assets are booked at cost implies that its valuations are significantly lower than current market value,” says the analyst.

“Its peers like Broadway and Chosen were recently acquired at much higher valuations. We believe that Fu Yu is an attractive target for takeover/privatisation by larger industry peers,” he adds.

As at 11:37, shares of Fu Yu are trading 2.6% lower at 19 cents.