Excerpts from analysts' reports

KGI Fraser analyst: Renfred Tay

valuetronics boxbuild2.14Net cash (incl. AFS financial assets) is now at a record HK$819m (~S$0.39 per share) after VALUE generated another HK$47.6m in operating cash flow.

Value/yield/recovery play; Maintain BUY. Although we have an unchanged view on FY17F, we fine tune our forecasts slightly with the updated outlook from management.

Our revenue and net profit forecast changes by ‐2% and +0% respectively.

Our TP of S$0.62 is unchanged (still based on 10x FY17F P/E)
given the minor impact from our forecast tweaks on earnings.

VALUE currently trades at 8.2x FY17F P/E (2.5x ex‐cash) and 2.1x FY17F EV/EBITDA.

Share price: 
51 c
62 c

We also note that about S$0.39 of its stock price of S$0.525 comprises of its cash and bond holdings.

We continue to favour VALUE for its value/yield/recovery story and maintain our BUY rating.

Key risk: Unforeseen setbacks at VALUE’s automotive customer could bring about lower than expected ICE growth.

UOB Kay Hian analyst: Nicholas Leow

Share price: 
51 c
60 c

1QFY17 net profit fell 11.6% yoy to HK$29.6m, attributable to the exit from the mass market LED segment. Valuetronics is trading at 8x FY18F PE (ex-cash: 3.3x) with a potential dividend yield of 7.1%.

Maintain BUY and PE-based target price of S$0.60.

The company remains a very defensive manufacturing play with solid cash-generating characteristics and a resilient dividend yield.

Prudent balance sheet with zero debt. As of 30 Jun 16, net cash stood at S$0.34/share, up from S$0.22/share as at 31 Dec 16. Net cash/share forms about 60% of Valuetronics’ market capitalisation.

If we were to include available-for-sale (AFS) financial assets, net cash/share would have been S$0.37, or 72% of market capitalisation. AFS financial assets comprise mostly US$ investment grade bonds, giving a yield of 2-3%. The group continues to maintain a very prudent balance sheet with no debt.

Full UOB Kay Hian report here.

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