Valuetronics Holdings

[Stockerman]

what is the economic moat of Valuetronics? It is in the electronics sector, which does not seem to be "defensive"?

What was the lowest yield so far in the history of listing?

Tks for the patience in answering my qns.

[felixleong]

the moat is not wide but its definitely deep, they have long term relationship with customers such as Philips
its very difficult for their customers to move production someone else, cause the new manufacturer might not live up to the same quality

any big screw up in their products can be very damaging to philips, so its risky to switch out just for cost savings

[Stockerman]

Still, I am very wary of management drumming up interest to drive up share price and only to sell right at the top of the market.
This does not reflect very well of the management and their integrity...

[felixleong]

generally shareholders, management and anyone with vested interested would want a higher stock price
they would probably get a much better valuation if they are now listed in HK

there are unhealthy ways to boost stock price by spreading rumours of take over etc

but the management is doing it the right way by meeting investors and analyst
given them presentation and making them understand how to value the company more accurately

however currently investors are just crazy over reits, manufacturing stocks such as venture and valuetronics are just not interesting to them

to me its a very good news, because its unpopular we get to be it sooo cheap with a 50% of margin of safety, hahaha ^^

[dzwm87]

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%)

Your margin of safety is only 30-odd%. If I am not wrong, it's the upside over your estimated "intrinsic value".

Honestly, they have no moat. If there is a moat, why did gross margin fell over the years from 17% in 2009 to 12% in 2013. Clearly, they are finding it hard to expand with the same margin or they are facing pricing pressure from their suppliers.

Moreover, mgmt clearly timed it right as they sold it off the peak before earnings dip from the termination losses of their licensing business. Nothing else we can argue - they have inside info into their own business. It will be good if they can do some open market purchase now but we are not seeing it. One thing interesting to note is the stock is still at that range of 20.5c despite being in cum-dividend. Market doesn't seem to price in the 1+ cent of dividend.

Somehow the market has been pricing Valuetronics at 6x + P/E and the discount is probably due to them being in an OEM business. You can say that they are going to take it private but they have always been in a huge hoard of cash for the past few years. Why didn't they take it private back then?

But moving forward, we could see some earnings 'growth' as they recover from their one-off losses in FY2013. Conservatively, you are being paid 6 to 7% in dividends while waiting for the 30% upside to be realised.

[felixleong]

margin of safety % depends on if you use cost or fair value as denominator
for your example u used fair value as denominator

for me i generally use my cost as the denominator, so 10 cents bonus over 20 cents cost

gross margins fell for many reasons, like labour cost, raw material costs, pressure from customer
however management is confident that they would be able to maintain it at double digits, 10%+
but really have to see how they play it down in the years to come

overall valuetronics is not an attractive business at all

but its a fair company selling at a good price

if you are looking for a good company, valuetronic is definitely not one ^^

[Contrarian]

How does this compare with VENTURE?

[NTL]

Still, I am very wary of management drumming up interest to drive up share price and only to sell right at the top of the market.
This does not reflect very well of the management and their integrity...

Top of market is in Jul 11. So they did not really sold at the top. As the sales is an one-off event, I do not know if it is really a "drumming up and sell" case. I am baring that in mind when I took up position. Nevertheless, I give them the benefit of doubt. If they do it again, then they will lose my trust.

---

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%)

Your margin of safety is only 30-odd%. If I am not wrong, it's the upside over your estimated "intrinsic value".

Honestly, they have no moat. If there is a moat, why did gross margin fell over the years from 17% in 2009 to 12% in 2013. Clearly, they are finding it hard to expand with the same margin or they are facing pricing pressure from their suppliers.

Moreover, mgmt clearly timed it right as they sold it off the peak before earnings dip from the termination losses of their licensing business. Nothing else we can argue - they have inside info into their own business. It will be good if they can do some open market purchase now but we are not seeing it. One thing interesting to note is the stock is still at that range of 20.5c despite being in cum-dividend. Market doesn't seem to price in the 1+ cent of dividend.

Somehow the market has been pricing Valuetronics at 6x + P/E and the discount is probably due to them being in an OEM business. You can say that they are going to take it private but they have always been in a huge hoard of cash for the past few years. Why didn't they take it private back then?

But moving forward, we could see some earnings 'growth' as they recover from their one-off losses in FY2013. Conservatively, you are being paid 6 to 7% in dividends while waiting for the 30% upside to be realised.

It was mentioned previously that they are facing increase cost due to the implementation of minimum wages in China where their factory is. The margin is also affected by their product mixed. As they increase their consumer products, the margin will fall. Looking forward, very likely it will fall lower.

They had mentioned that some of the customers are closing down their own factory and move the production to Valuetronics factory. This is also part of their growth. Shall see the result in the coming FY. Will this be another "pump then sell" case? We shall see in coming year.

Personally I don't mind get paid while waiting. Let see how this story will unfold.

[Wildreamz]

Philips LED presence is big in Singapore (and the world) and getting bigger. Over the past year, there is an obvious marketing push by Philips to improve brand awareness of Philips LEDs in Singapore in almost all major supermarkets and lighting stores (promotions, demos etc).

Other brands like Osram and Panasonic also has the CFL and Incandescent replacement LED products, but is much lesser known in Singapore. Philips also have much higher penetration rate than any other brands (Philips LEDs can be seen in stores like Home Fix, NTUC Xtra, but not always other brands). Philips also has a much wider range and selection (base type, wattage etc) than any other brands in this sector.

Over the course of the next few years, the demand as well as market share of LED will only increase as the cost of LED decreases and the light quality improves (CRI, power efficiency etc).

Also take into consideration the property boom in Singapore and the implied demand for power efficient lightings over the next few years.

At the current price, Valuetronics is definitely a value buy with good potential for mid to long term growth.

[Image: 2013-05-15_LED_Drivers.jpg]

http://www.imsresearch.com/press-release...stResearch

(odd lots vested)

[NTL]

Recently went shopping for lightbulbs. Realised that Philips is much more expensive than the rest. Too much marketing and advertisement cost?

Anyway, just read valuetronics latest AR. One of the customer already move their production to them. Let's see how it is affecting their next Q results.