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Investors’ Corner (CWT, Valuetronics, ValueMax, Yangzijiang)
Investors' Corner | 26 June 2014
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By: Shane Goh
Articles (99) Profile

Price – $1.70
Target – $1.92

Recently, Dagang bonded warehouse at Qingdao port was being investigated for the fraudulent practice of pledging single batches of metals as collateral for multiple loans. We think that the indirect impact of the incident will lower liquidity and commodity trade flows in China. CWT’s revenue exposure to Qingdao port comes from collateral management service under its logistics segment. As CWT’s logistics turnover derived from China is less than 3%, the segment will be little affected by the systemic impact. In addition, we expect commodity marketing earnings to be fairly resilient. We think indiscriminate fear of companies involved in China’s commodity business will arise should further negative news appear. Unless unforeseen legal liabilities arise, we think the subsequent price dips present chances for accumulation. Maintain BUY. OCBC Investment (23 Jun)

Valuetronics Holdings
Price – $0.405
Target – $0.605

On the back of a robust 4Q14, Valuetronics Holdings’ adjusted FY14 revenue, gross profit and net profit increased 10.1%, 20.9% and 24.9% to HK$2,433.3m, HK$326.8m and HK$147.9m. The higher gross profit and net margin was due to a favorable change in product sales mix and significant growth in the industrial and commercial electronics segment. The segment’s revenue has now steadily risen for 5 straight quarters, underpinned by a focus on incremental growth by seeking small- and mid-sized manufacturers to outsource production to Valuetronics. Additionally, we think their formalisation of a dividend policy of at least a 30% to 50% of net profit in any financial year is a good first sign of unlocking their excess cash to investors. A gradually improving global economy, an expanding product portfolio and on-going efficiency improvements is the foundation for continued growth – and so far, Valuetronics has been on the right track. Upgrade to BUY. Phillip Securities (20 Jun)

ValueMax Group
Price – $0.44
Target – $0.56

The Ministry of Law will form an advisory committee to review regulations for the licensed moneylending industry and make recommendations on measures such as capping interest rates for loans and restricting fees. We believe the tightening of the industry would be positive for pawnbrokers as more people are expected to turn to pawnbrokers, given fewer loans available as well as the decrease in the number of money lenders. In 2013, the total amount of loans dropped 22.5% y-o-y to $5.5b, from $7.1b, mainly due to sharp plunges in gold prices. However, total amount of loans redeemed including interest, was still higher at $5.6b, justifying the low default rates across the sector. In addition, loans given out by pawnbrokers improved gradually to $441.1m in Mar-14 from $431.5m in Jan-14, substantiating our belief that FY14 will see a turnaround. We think that 2Q14 could be an inflection point for pawnbrokers, especially ValueMax Group. Maintain BUY. DMG & Partners (19 Jun)

Yangzijiang Shipbuilding (Holdings)
Price – $1.11
Target – $1.53

Yangzijiang Shipbuilding (Holdings) won new contracts, consisting of 4 units of 260,000 deadweight tonnage very large ore carriers from Australia amounting to US$286m. Simultaneously, it also announced that it will redirect its attention from its non-core businesses to core shipbuilding and related businesses, such as shipping logistics and trading businesses. We are positive on the move as investors have shied away from the stock for years due to its exposure to pseudo-banking. With this being removed, the stock could be re-rated. As at end-1Q14, it had Rmb12.8b, or 67% of its equity, invested in held-to-maturity (HTM) assets. Yangzijiang could wind down Rmb6.2b, or 50%, of the Rmb12.8b HTM investment by end-14 and another 35% by end-15. Investment income will be halved from Rmb1.4b in 2014 to Rmb770m in 2015. Conversely, interest income from deposits could double y-o-y to Rmb740m in 2015. We see potential for higher dividend payout on the back of a rising cash pile. Upgrade to ADD. CIMB Securities (18 Jun)

Currently pursuing his Chartered Financial Analyst qualification, Shane provides coverage on the property, consumer and environmental sectors at Shares Investment.

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Valuetronics Hldgs  0.710 -- --   
Business: Provides integrated electronics manufacturing services. [FY19 Turnover] Industrial & commercial electronics (58.9%), consumer electronics (41.1%).

Insight: May-19, FY19 revenue fell 0.9% to HK$2.8b due to w... Read More
ValueMax  0.280 +0.005 +1.82%   
Business: Co provides pawnbroking services & the retail & trading of pre-owned jewellery & gold. [FY18 Turnover] Retail & trdg of pre-owned jewellery & gold (79.6%), pawnbroking (13.2%), moneylending (7.2%).

Insight: Feb-19, FY18 revenue fell 12.8% to $208.7m due to ... Read More
Yangzijiang Shipbuilding (Hldgs)  1.520 +0.010 +0.66%   
Business: Co is one of the largest non-state owned shipbuilders in China. [FY18 Turnover] Shipbuilding (58.1%), trading (32.8%), investments (6.7%), others (2.4%).

Insight: Apr-19, 1Q19 revenue jumped 26.8% to Rmb6.3b due t... Read More

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