Valuetronics Holdings

[felixleong]

I think overall results were good
Revenues down 2.6%

but net profits from continued operations up 2.5% meaning better margins

cash position also still solid

---

Gross profit increased by 6.6% to HK$78.9 million (Q1
FY2013: HK$73.9 million) while gross
profit margin improved from 11.8% to 12.9%, mainly
due to the change in product mix during
the period.

---

results beated market expectations!
today up 5%!
congrats to those who vested recently, huat ah $$$

[NTL]

Managed to find some time to reread the result and the media statement.

From the size of the payable and receivable, it seems to me that they are giving their customers better terms in paying (maybe up to 90days?). They are also taking their time to pay their suppliers (3mths worth too).

The explanation given by the company is due to a change in sale mix. But will that lead to the increase? While the receivable increase by HK$120M, the payable increase by HK$310M! Is this due to new customers? Hopefully they can get paid by the customers so that they can pay their debts...

Let's see where next quarter the numbers will bring to...

[felixleong]

up 7% today to 21 cents at very high volume
over 1.8 million shares traded, given the fast run up

I think the price might be capped at 24 cents, as investors would fear of management trying to sell out their stakes again at 24 cents or higher.

[CY09]

Its very important for valutronics to report a strong full year results. Hopefully EPS will be 5 sg cents. That means dividends will be around 2 cents and will be a catalyst for market to re-rate it.

<vested>

[dzwm87]

Just read through 1Q14 result:

1. Main question will be its drastic improvement in working capital management from around 67 CCC days in FY2013 to 39 CCC days in 1QFY2014. This improves cash flow so drastically that net cash is now 85% of market cap! But I reckon the improvement is due to a timing issue. Increase in A/P which amounts to HKD317mln is about 60% of COGS for the quarter. It's too high especially for an OEM manufacturer. Increase in A/R is around 20% of 1Q revenue which is alright. So I do believe working capital investment should normalise in the subsequent quarters simply because A/P is too high.

2. Seem like market is really discounting the one-off loss in FY2013. In that case, assuming no significant downside event, 2Q2014 should be a major catalyst since Valuetronics recognized a bulk of its termination loss in 2Q2013. I would expect marketing gimmick with "Net profit increase XX%!" during their next quarter reporting.

[NTL]

Just read through 1Q14 result:

1. Main question will be its drastic improvement in working capital management from around 67 CCC days in FY2013 to 39 CCC days in 1QFY2014. This improves cash flow so drastically that net cash is now 85% of market cap! But I reckon the improvement is due to a timing issue. Increase in A/P which amounts to HKD317mln is about 60% of COGS for the quarter. It's too high especially for an OEM manufacturer. Increase in A/R is around 20% of 1Q revenue which is alright. So I do believe working capital investment should normalise in the subsequent quarters simply because A/P is too high.

2. Seem like market is really discounting the one-off loss in FY2013. In that case, assuming no significant downside event, 2Q2014 should be a major catalyst since Valuetronics recognized a bulk of its termination loss in 2Q2013. I would expect marketing gimmick with "Net profit increase XX%!" during their next quarter reporting.

Hi dzwm87,

Mind if I ask why are you looking just at the increase in A/P and A/R, and not on the absolute figures? Sorry that I am not accounting trained, thus have to ask this question. The A/P and A/R are worrisome for me, as they are close to their quarter revenue and COGS. That works out to be 90days of debts in both ways!

Mind if I ask you too how you work out the CCC?

Thanks.

[GFG]

Just read through 1Q14 result:

1. Main question will be its drastic improvement in working capital management from around 67 CCC days in FY2013 to 39 CCC days in 1QFY2014. This improves cash flow so drastically that net cash is now 85% of market cap! But I reckon the improvement is due to a timing issue. Increase in A/P which amounts to HKD317mln is about 60% of COGS for the quarter. It's too high especially for an OEM manufacturer. Increase in A/R is around 20% of 1Q revenue which is alright. So I do believe working capital investment should normalise in the subsequent quarters simply because A/P is too high.

2. Seem like market is really discounting the one-off loss in FY2013. In that case, assuming no significant downside event, 2Q2014 should be a major catalyst since Valuetronics recognized a bulk of its termination loss in 2Q2013. I would expect marketing gimmick with "Net profit increase XX%!" during their next quarter reporting.

Hi dzwm87,

Mind if I ask why are you looking just at the increase in A/P and A/R, and not on the absolute figures? Sorry that I am not accounting trained, thus have to ask this question. The A/P and A/R are worrisome for me, as they are close to their quarter revenue and COGS. That works out to be 90days of debts in both ways!

Mind if I ask you too how you work out the CCC?

Thanks.

Hi
I would also like to ask how you know the CCC days? Its not stated anywhere and from what I understand, you cant work it out from the financial statements.

@NTL: "The A/P and A/R are worrisome for me, as they are close to their quarter revenue and COGS. That works out to be 90days of debts in both ways! "
90 days of debt means you are assuming they will pay all their payables, and get 0 of their receivables... that's a really pessimistic scenario.

Seeing that Philips is their major customer, I would be more interested to know who owes the receivables. Philips would be less likely to not pay up.
In any case, the receivables has jumped up much more rapidly than the payables, so I would closely monitor that in the coming quarter

---

Also, I'd like to point out that in the FY14 Q1, they list the shares issued as 360,038,750.
But this doesnt include the shares from the options exercised, as these were issued in July 2013, just after the Q1.
So now the total shares issued is 365188750, and I'd expect some NAVdilution for Q2 report

[NTL]

Hi
I would also like to ask how you know the CCC days? Its not stated anywhere and from what I understand, you cant work it out from the financial statements.

@NTL: "The A/P and A/R are worrisome for me, as they are close to their quarter revenue and COGS. That works out to be 90days of debts in both ways! "
90 days of debt means you are assuming they will pay all their payables, and get 0 of their receivables... that's a really pessimistic scenario.

Seeing that Philips is their major customer, I would be more interested to know who owes the receivables. Philips would be less likely to not pay up.
In any case, the receivables has jumped up much more rapidly than the payables, so I would closely monitor that in the coming quarter

---

Also, I'd like to point out that in the FY14 Q1, they list the shares issued as 360,038,750.
But this doesnt include the shares from the options exercised, as these were issued in July 2013, just after the Q1.
So now the total shares issued is 365188750, and I'd expect some NAVdilution for Q2 report

Hi GFG,

I don't mean getting zero back from their receivables. But having a 90days receivable is something common that happen in contract manufacturing industry. Usually what I see is 30days, and hopefully to collect all debts within 60 days.

Same for their payables. Why does their suppliers gave them such good terms? In electronics industry where the profit margin is very narrow, suppliers will try to make money from fast turn around time. Money stuck with the customers means that less money for themselves.

Thanks for bringing up the dilution due to the exercise of options. I suppose the 1% should not have significant impact on the overall. Believe this is a way that the management "buy" into the company shares.

So, for now, there are a few things to monitor:

1. Next quarter A/P and A/R

2. Whether management sell off their shares at around $0.24

3. Whether management exercise their options at the beginning of each quarter before the announcement of results.

[guitarist]

This blogger has a different CCC number.

http://www.investmentmoats.com/money-man...situation/

[GFG]

This blogger has a different CCC number.

http://www.investmentmoats.com/money-man...situation/

Oh his CCC number is yearly, not the latest FY14Q1
The annualised CCC figure is given in the AR / media release usually.
Like I said, its not something that can be calculated from the financial statements