Excerpts from UOBKayHian report
Valuetronics (SGX: BN2)
- Valuetronics ’s 1HFY23 net profit of HK$58m (+2% yoy and qoq) was in line with our expectation, making up 50% of our FY23 estimate.
- 1HFY23 revenue went up 4% yoy due to increased customer demand. However, margins have fallen due to higher component prices and supply chain disruptions.
- A cautious outlook is maintained amid market uncertainties, the Russia-Ukraine conflict and US Fed rate hikes.
Maintain HOLD and target price of S$0.52.
Valuetronics results in line with expectations
Valuetronics’ (VALUE) 1HFY23 net profit of HK$58m (+2.3% yoy, +1.8% qoq) was in line our expectation, making up 50% of our FY23 estimate.
Revenue increased 3.6% yoy due to greater demand in the US, Hong Kong, Indonesia and Canada segments. However, we note that gross and net margins fell by 1.7ppt and 0.1ppt respectively, due to:
- higher component prices caused by tight supply, and
- impact of the group’s supply chain disruption and productivity.
The ICE segment’s revenue rose due increased customer demand
VALUE’s industrial and commercial electronics (ICE) segment’s revenue increased by 15.9% yoy to HK$805.5m, due to a significant rise in demand from customers.
However, revenue declined for the consumer electronic (CE) segment, by 23% yoy to HK$246m. This is mainly due to poorer demand in end-markets.
Conservative outlook due to challenging macroeconomic environment
VALUE expects lower consumer demand as consumer purchasing power and business confidence weakens from:
- the Russia-Ukraine conflict,
- rising geopolitical tensions, and
- US Fed rate hikes.
Valuetronics proposes interim dividend of 4 HK cents/share
VALUE has recommended an interim dividend of 4 HK cents/share for 1HFY23 (4 HK cents/share in 1HFY22). This represents a payout ratio of 30%.
Maintain HOLD and target price of S$0.52, pegged to an unchanged long-term mean PE of 11x FY23 EPS. The catalysts will be positive outlook on Vietnam market and proactive management amid market challenges.