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Can this tech manufacturer ride the boom?

Stanislaus Jude Chan
Stanislaus Jude Chan • 2 min read
Can this tech manufacturer ride the boom?
SINGAPORE (Nov 10): RHB Research is raising its target price for electronics manufacturer Valuetronics Holdings by nearly 13% to $1.05 on the back of healthy growth drivers for both its businesses.
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SINGAPORE (Nov 10): RHB Research is raising its target price for electronics manufacturer Valuetronics Holdings by nearly 13% to $1.05 on the back of healthy growth drivers for both its businesses.

However, the research house is maintaining its “neutral” rating on Valuetronics as the stock is already trading close to the higher target price.

In the 2Q18 ended September, Valuetronics posted a 33.5% rise in earnings to a record of HK$50.8 million ($8.9 million), led by a 26.5% increase in group revenue to HK$725.7 million.

The increase in revenue was driven by higher contribution from its Consumer Electronics (CE) and Industrial & Commercial Electronics (ICE) segments, which grew by 45.7% and 10.5%, respectively.


See: Valuetronics announces record 2Q earnings of $8.9 mil on higher revenue; declares 7 HK cents dividend

“Going forward, we expect this performance to continue for the remaining quarters of FY18 due to healthy growth drivers from both its businesses,” says RHB analyst Jarick Seet in a Friday report.

The strong growth from Valuetronics’ CE segment was mainly driven by smart light-emitting diode (LED) lighting products with Internet of Things (IoT) features.

Meanwhile, its ICE business grew on the back of an increase in demand from some of its existing customers, as well as new projects involving in-car connectivity modules used in the automotive industry.

See opines that Valuetronic could see a surge in in-car connectivity modules, due to the rising demand for new experiences and connectivity features within an automotive vehicle.

“As a result, we raise our FY18 and 19 NPAT estimates by 4%,” Seet says.

In addition, he notes that Valuetronics had signalled its intention to use the majority of its HK$627.5 million ($109 million) cash pile for M&As.

“Valuetronics’ targets include downstream players, or horizontal businesses that fit and synergise with its existing business – which now boasts stronger fundamentals,” Seet adds.

As at 2.54pm, shares of Valuetronics are trading 2.5 cents higher at $1.02, implying an estimated price-to-earnings ratio of 10.6 times and a dividend yield of 4.8% in FY18.

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