SINGAPORE (May 16): RHB Research is keeping its “neutral” call on Fu Yu Corporation and lowering its target price to 20 cents, from 23 cents previously.

This comes despite Fu Yu posting a 3.2% rise in earnings to $0.5 million for the 1Q ended March, as revenue grew 3.6% to $46.4 million on higher sales from its Singapore and Malaysia operations.

See: Fu Yu Corp posts 3.2% rise in 1Q earnings to $0.5 mil

“Fu Yu is seeing encouraging signs in topline growth, which may mean that its revenue decline has bottomed out,” says lead analyst Jarick Seet in a report on Wednesday.

“Being conservative, we prefer to wait for more positive signs to reaffirm its growth, but investors can hold on to its shares for attractive dividends,” he adds. According to the brokerage, Fu Yu offers an attractive dividend yield of 8.1% for FY18F.

In addition, Seet says he likes the group’s cash generation and sturdy balance sheet, with a cash balance of $98.5 million and zero debt.

“We also believe that it is an attractive takeover target by regional peers that may want access into the South-East Asian market,” Seet says.

As at 1.24pm, shares of Fu Yu Corp are trading flat at 18.6 cents, implying an estimated price-to-earnings ratio of 22.3 times and a price-to-book ratio of 0.9 times for FY18.