SINGAPORE (Jan 6): RHB continues to keep its “buy” call on Fu Yu with a target price of 29 cents, while reiterating its view of the manufacturer and supplier of high-precision injection molds and plastic parts as an attractive privatisation or takeover candidate.

In an updated report on Tuesday, analyst Jarick Seet once again highlights the company for its improving core business, undemanding valuations and attractive dividend yield of 7.9% in FY16F.

He now expects the company to generate a dividend yield of 8.1% for FY17 given the likelihood of the company’s positive cash flow from operations increasing further in 4Q16, as well as its $100 million net cash hoard.

(See also: Could this company be next in line for privatisation?)

In Seet’s view, Fu Yu’s cash generation and strong balance sheet makes it “a very attractive target for acquisition by overseas and local peers, or even private equity funds”, especially after the takeover of Innovalues by private equity firm Northstar.

(See also: PE firm Northstar plans acquisition of Innovalues for $331.4 mil)

“Going forward, we expect Fu Yu to ride on the strong US dollar and continue to improve its margins from cost optimisation while it moves towards better margin, lower-volume projects,” concludes the analyst.  

Shares of Fu Yu are trading at 19 cents.