Valuetronics Holdings

[Ray168]

Below is the link to webinar presentation on Valuetronic.... from 0848 minutes onwards.

http://www.youtube.com/watch?v=rFc8XqSyq...r_embedded

Not vested yet.

Coincidentally, Phillip did a webinar presentation on Valuetronics today. Some key info apart from what's on their annual reports:

+ Philips LED light bulb accounts for 40% of total revenue
+ Other Philips non-LED light bulb products (i.e. electronic toothbrush, shavers, etc) account for another 20% to 22% of total revenue [So, Philips actually attribute to more than 50% of Valuetronics' revenue - so if Philips don't do well, expect the same for Valuetronics though the converse may not be true.]
+ They didn't give the GPM for Philips products but I expect GPM to be lesser than overall GPM. Consumer electronics, about 75% of revenue, is more of a high volume but low margin product mix.
+ They have around 4,000 workers which means wage cost will be a big impact for them. They are aiming to mitigate this by promoting productivity efficiency and adopting automated machines [didn't ask how much of the latter will reduce their work force]
+ Overall, they pitch that they had been the better player given that the entire EMS industry faces the concern of deteriorating margins. That being said, an investor can just avoid the entire industry.

[NTL]

Thanks for sharing.

Just finish listening to it. Seems like the Chairman is not really happy with the low share price of the company.

Will the company goes the way of Man Wah? Delist in Sg and get relisted in HK?

[CY09]

Thanks for the video.

From Q&A " Philips LED contributes 40-44%, Philips consumer lifestyle (Non-LED) contribute 22-23% of total revenue. Hence we can safely say 60-65% of revenue from Philips."

He also mentions going forward they will try their best of ensuring double digit GPM in the face of escalating cost (not very optimistic)

Signs of recovery of their customers, and their willingness to continue paying dividend is a good sign

[felixleong]

any views on the valuetronics as a value buy?

Currently at 20.5 cents
PE about 6, yield about 6%
net cash position and a pretty decent discount to its book value of 28 cents

I think its fair value is probably around 30 cents
an entry at 20 cents could mean a very conservative margin of safety of 10cents (50%)

please correct me if any info in my post is wrong thanks

[NTL]

I have intention to get more after XD. Below 20c should be safe enough.

If my analysis is not wrong, net cash is around 10c. So PE is effectively only 3. Without the write-off, it could potentially be lower.

I have strong believe that next year dividend will be higher, and it may just get delist.

[felixleong]

Yeah you are correct about the net cash position, its about 3 year's worth of earnings kept in their cash column
however management I think did say before, they just keeping it to use for future capex or expansion

dividends still likely to paid from earnings (usually half of earnings paid as dividends)
to unlock the cash reserve like what you said probably via delisting

[CY09]

In my opinion, the market seems to price Valuetronics according to its PE of ard 5-6. So if one wishes to find its intrinsic value, calculate how much you expect FY 14 to be and multiply by 5 or 6.

In addition, do note that some negatives: GPM of valuetronics products are expected to decline as highlighted in previous posts, it also has many unexercised share options which are lower than $0.205. If all share options are exercised, it will enlarge share base by 5%.

For me, I do think there is value and because there has been relatively little analyst coverage recently, valuetronics value will only be recognised when the company posts its third quarter results and the market notices that current FY will be better than previous. In turn, FY14 dividends will be higher (the company has been giving dividends through a pay-out ratio, roughly 40-50%). Of course, I am assuming market sentiments are roughly the same as now and valuetronics do not announce any more sudden one-off write downs. I would classify this as a turnaround. My predicted EPS is 29-30 cents HKD (assuming no share options is exercised)

It has a great balance sheet and I like the fact that its OCF generated tends to be higher than its cash used in CAPEX

<vested>

[Stockerman]

Is the earnings sustainable over the entire economic cycle?
Is this company worth buying for its high dividend yield (for now)? Has it consistently paid out dividend both in "good" and "bad" times?

Why did the Chairman/MD sell down from 22% to 18% on 7 March 2012 , when the full year results were "good"?

Any views pls?

[NTL]

Is the earnings sustainable over the entire economic cycle?

So far, so good. Based on the listing history, they have been positive every year so far.

Is this company worth buying for its high dividend yield (for now)? Has it consistently paid out dividend both in "good" and "bad" times?

They paid through 2007-2009. Their dividend payout is generally around 40% of the annual profit. That is good enough for me.

Why did the Chairman/MD sell down from 22% to 18% on 7 March 2012 , when the full year results were "good"?

That would be the only time he sold off his shares. When he sells off more in future, then I will make the judgment call.

Any views pls?

Good enough?

---

In my opinion, the market seems to price Valuetronics according to its PE of ard 5-6. So if one wishes to find its intrinsic value, calculate how much you expect FY 14 to be and multiply by 5 or 6.

This is the reason why I think they may just delist in Sg and relist in HK. While I don't have the statistic, I believe that HK will be able to give them a far better valuation.

I still missed my Man Wah..... Wondering how it is doing now.

[felixleong]

Is the earnings sustainable over the entire economic cycle?

Yeah, they have always been positive. over the last 5 years core earnings have improved and net cash position too

Is this company worth buying for its high dividend yield (for now)? Has it consistently paid out dividend both in "good" and "bad" times?

The current yield is 6%, at 20cents my forecasted yield is 8% for 2014 and 10% for 2015, since the "bad" part of the business is already removed, looking ahead earnings should be a lot better and they have consistently been paying out good dividends of close to 40-50% earnings

Why did the Chairman/MD sell down from 22% to 18% on 7 March 2012 , when the full year results were "good"?

Usually when the management buys its always a good sign, but for sell it may not automatically be a bad sign. I do not not the their actual reason but their stake in the company is still significant, they get as much as a salary as they do from dividends collected