Valuetronics Holdings

[mrmoon]

Is there any view on this company? It has announced very strong results in the recent quarters.

If OCBC research (see attached) is right, this company is very undervalued at 24.5 cts.

[Musicwhiz]

Is there any view on this company? It has announced very strong results in the recent quarters.

If OCBC research (see attached) is right, this company is very undervalued at 24.5 cts.

You know what I hate about analyst reports? They almost never ever comment on the Balance Sheet strength and Cash Flow Statements! And these are far more important than the income statement. Basically I had to check these out for myself using SGXNet....

A quick glance shows worrying signs:-

1) 9M 2010 revenues were up 73.5%, but Trade Receivables nearly doubled while inventories nearly tripled! What could be the reason for this? Debtors paying slower and inventory piling up?

2) Noted cash had dropped by nearly HK$100 million.

3) The Company now has bank borrowings, as compared to 9 months ago. Bank borrowings now exceed cash balance, putting the company in a net debt, instead of net cash position. As a result, finance costs have also risen.

4) Operating cash flows were strongly negative for 9M 2010, to the tune of HK$62.8 million, while capex took up another HK$68 million, so effectively negative FCF was around HK$130 million. Hardly an amount to sniff about, especially when your cash balance is just HK$37 million.

5) Under Financing Cash Flows, what the heck is "Net Advancement from Invoice Financing"?? I've studied many years of accounting but never came across such a colourful term. Considring it's about HK$50 million INFLOW, shareholders should be very concerned indeed.

Now why weren't all the above flagged out by the analyst???

[freedom]

Net Advancement from Invoice Financing something in Chinese called "票据贴现"?

[egghead]

Is that some kind of a loan with invoices as collateral?

[kazukirai]

5) Under Financing Cash Flows, what the heck is "Net Advancement from Invoice Financing"?? I've studied many years of accounting but never came across such a colourful term. Considring it's about HK$50 million INFLOW, shareholders should be very concerned indeed.

My guess is that this refers to 'Factoring' whereby companies pay commercial banks a fee or a percentage of the invoice amount for a loan?
e.g: Commercial Banking- Factoring by ING

Any one familiar with commercial banking who can explain this?

[mrEngineer]

Anyone has any idea why both majority shareholders sold close to 4% each? I was wondering if it was a single acquirer, wouldnt the buyer have to declare that they are above 5% stakeholdings?

Anyway, thanks to MW on pointing on the strange 3Q2010 results especially after comparing with the FY2011. It really goes to show that the working capital requirements in the company is pretty heavy. The pleasing thing is that OCF are largely positive for 3Q 2011 results.

[buddy]

Anyone has any idea why both majority shareholders sold close to 4% each? I was wondering if it was a single acquirer, wouldnt the buyer have to declare that they are above 5% stakeholdings?

Anyway, thanks to MW on pointing on the strange 3Q2010 results especially after comparing with the FY2011. It really goes to show that the working capital requirements in the company is pretty heavy. The pleasing thing is that OCF are largely positive for 3Q 2011 results.

---

They indicated reasons were personal. Philips is > 50% of revenue & they control the credit term. Given Philips business is increasing as %ge of revenue working cap. requirements are increasing.

[Contrarian]

I met the CEO before.

The CEO is very smart to list here. His salary already tell me something. He has already drawn good salary last few years for a tough business.

It is all he win, if u buy, u only get 1 ct dividend each year.

Yes the accounts do not instill comfort in my heart. I rather drink coffee, eat bread and look for next one.

[mrEngineer]

The yield is too tempting to pass.. His salary is still ok. Look at Yongnam CEO salary. That is really alarming.

[Contrarian]

> The yield is too tempting to pass.. His salary is still ok. Look at Yongnam CEO salary.
> That is really alarming.

I won't buy a stock which gives high yield for a cut-throat business. I rather go for sustainable yield...