Finding Value in Valuetronics (BN2.SI)

Valuetronics share price has fell more than 10 percent this last week. This is primarily because of the announcement of FY profit ending 31 March 2020 falling 10.3 percent to HK$179m compare to HK$199.5 million a year ago.
But the biggest risk is not just the Covid19 pandemic leading to the decline in earnings, but US-China trade tensions. This is because Valuetronics has close to 40% of its HKD 2.354B revenue deriving from US.
All analysts have given sell ratings this week.
Nontheless, I think there is Value in Valuetronics despite the pessimism.  
Strong Cash Generation
Current ratio is more than two times with total current assets of HKD 1.675B of which cash and bank deposits stand at HKD1,053B. Net cash generated from operations is HKD 346 M. The company has no debts and is a net cash company with SGD0.44 per share. Consider the share price of SGD0.595, you are paying SGD0.155 for the business which has close to 30 years of history with strong earnings results in the past years.  
PE Ratio and Dividend
Market Cap of the company is approx. SGD 260 M. With earnings of SGD 32.5 M (HKD 179 M), PE ratio is 8.
Dividend in 2019 is SGD 0.047 (HKD 0.26) and in 2018 is (HKD 0.25), which translate to approx. 8%.
FY2020 DPS is expected to drop to HKD 0.20 which still yield 6% dividend. Trailing 12 months PE may increase to 10 due to projected fall in earnings. I think the figure is still reasonable for a buy with long term keep.
I also like the fact that Management team has long term vision to see that China Manufacturing is getting more and more expensive, and Vietnam will be a cheaper and very good alternative to China.
See my earlier post here, why I am very positive on Vietnam.
The company already have existing leased production facilities in Vietnam, but a greater ambition is in progress.  A site of more than 110,000 sqm was acquire in Vietnam for the construction of the company’s new manufacturing plant. Mass production is set to start in 2022.  The cost of the Vietnam plant is HKD200m and will be self-funded.
Vast Experience
The Chairman is the MD who is also in the company since 1996. MD is late 50s which is not too old consider his 24 years in the company. Both the MD and ED are top two shareholders of the company which makes them having ownership to drive the business. The rest of the management all has more than 20 years of relevant business experiences on average.
Good Remuneration Scheme
Also, the MD and ED does not pay themselves high FIX salary despite the good performance of the company. Unlike many public listed companies who despite making huge losses are still paying themselves high fix salary. Instead Valuetronics top two guys drawn 84% of their remuneration from bonus. The highest paid management staffs all have higher percentage of the pay from bonus rather than high fix salary.
If Sino-US tensions persist, short term earnings will definitely be squeezed, but long-term outlook is bright in my opinion. Valuetronics is in the segment of electronic engineering and manufacturing services which I envisaged will serve a big role in the Technology of future. For e.g. Smart City. It has electronic product for automative industry provides data and media connectivity. Sales in Netherlands in particular to Philips has increase in the past year. This is with regards to smart lightings with IOT features, which I feel will have a big impact with hike demand in time to come. There is also already a technology called “LiFi” which uses light for internet connectivity to improve security within corporations and faster intranet connectivity.
Short term financials will be squeezed due to Sino-US trade tensions, hence the tumble of share price lately. But in my opinion, Valuetronics has strong management team and strong balance sheet that can definitely tide them off the storm. In the long term, Vietnam production facilities and technological demand will be the strong catalysts.

Disclaimer : I own shares of Valuetronics at the time of writing and this article is solely my opinion and not advice for you to buy into the shares. 

Related Posts

2 thoughts on “Finding Value in Valuetronics (BN2.SI)

  1. Hello everyone, Are you into trading or just wish to give it a try, please becareful on the platform you choose to invest on and the manager you choose to manage your account because that’s where failure starts from be wise. After reading so much comment i had to give trading tips a try, I have to come to the conclusion that binary options pays massively but the masses has refused to show us the right way to earn That’s why I have to give trading tips the accolades because they have been so helpful to traders . For a free masterclass strategy kindly contact ([email protected]) for a free masterclass strategy. He'll give you a free tutors on how you can earn and recover your losses in trading for free..

  2. Natural herbs have cured so many illness that drugs and injection can’t cure. I've seen the great importance of natural herbs and the wonderful work they have done in people's lives. i read people's testimonies online on how they were cured of HERPES, HIV, diabetics etc by Dr Edes herbal medicine, so i decided to contact the doctor because i know nature has the power to heal anything. I was diagnosed with Herpes for the past 3 years but Dr Edes cured me with his herbs and i referred my aunt and her husband to him immediately because they were both suffering from Herpes but to God be the glory, they were cured too .I know is hard to believe but am a living testimony. There is no harm trying herbs, Thanks. Write him on WhatsApp on +2348151937428. @dr_edes_remedies deals with
    (1)Alzheimer virus
    (5)Genital warts
    (7)Virginal infection
    Email him on [email protected]

Leave a Reply

Your email address will not be published. Required fields are marked *