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Investors’ Corner (Valuetronics Hldgs, Fu Yu Corp, Singapore Post, Yangzijiang Shipbuilding (Hldgs))
Investors' Corner | 15 July 2015
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By: Joey Ho
Articles (30) Profile

Valuetronics Holdings
Price – $0.44
Target – $0.62

We estimate that lighting revenue declined 21% y-o-y in FY15, comprising 49% of its consumer electronics revenue. Due to razor-thin margins, lighting is estimated to have contributed 10% of operating profits, limiting the downside to the group’s business. In recent years, the group has diversified to 9 industrial customers with the latest addition, a Taiwan-listed telecommunications equipment maker, contributing 5% to its revenue in FY15. We are positive on industrial, though growth could moderate in the near future. Industrial results had been outstanding in the last few quarters as 2 customers migrated their production to Valuetronics in China. After which, we expect industrial revenue to grow slower at 12% y-o-y in FY16 to FY18. Industrial gross margins contracted from 19.3% in FY14 to 18.8% in FY15 on rising costs in China. We expect Valuetronics to remain free cash flow positive and this will help to support its payout ratio at 50%, translating into 7% to 8% potential yields for FY16 to FY18. Upgrade to BUY. Maybank Kim Eng (10 Jul)

Fu Yu Corporation
Price – $0.19
Target – $0.30

We believe FY15 could be a record year for Fu Yu Corporation, with net profit levels not seen since FY04. Amid cost-cutting, restructuring efforts and higher-margin from its precision injection moulding and tooling segments, we expect gross margin to improve significantly to 13.9% and net profit to grow about 39% y-o-y for FY15. In addition, the expected pick-up in Singapore and China businesses should also contribute positively to earnings, and we expect revenue growth from the medical, environment and automobile products segments. The group is also keen to expand its automobile segment and is already in project talks with several parties. With rich cash flow generation from operations of $20m to $30m a year, FY15 will likely be a key inflection point and we expect a maiden dividend yield of 6%. Maintain BUY. RHB Research (9 Jul)

Singapore Post
Price – $1.89
Target – $2.07

With Singapore Post’s (SingPost) joint venture with Alibaba, we believe that the biggest overhang on the stock has been removed. Using SingPost’s wholly-owned subsidiary, Quantium Solutions (QS) as the joint venture vehicle, Alibaba will pay $91.7m for a 34% stake in QS. Despite establishing a floor for SingPost’s valuation, losing a 34% stake in its e-commerce logistics engine will likely lead to mild earnings dilution, and we cut our FY16 core net profit growth forecast from 5% to negative 2%. While we view the joint venture positively, we do not expect immediate volume growth as the biggest volumes are still in transhipments into and out of China, which SingPost already engages in. Within ASEAN, Indonesia is likely to be the key growth market, but infrastructure issues are likely to plague e-commerce growth in the near term. We are more positive on the medium term, when SingPost capitalises on Alibaba’s volumes as they expand across Asia Pacific, lowering the cost per parcel. Upgrade to ADD. CIMB Securities (8 Jul)

Yangzijiang Shipbuilding (Holdings)
Price – $1.35
Target – $1.00

We expect downward pressure on Yangzijiang Shipbuilding’s (Holdings) (YZJ) earnings amid weak Baltic Dry Index. With 14 bulk carriers delivered from itself and 9 more to come, the market appears unfavourable for YZJ as long-term time charter rates of US$7,900 to US$8,200 per day are well below the Baltic Exchange Panamax (BEP) of US$10,900, based on our estimates. The average spot rate is US$6,785, and despite recently recovering to US$9,322/day, it is still below BEP. The time charter market for the vessels is extremely weak, with just 1 ship contracted year-to-date and only 9 in 2014. Assuming that all its vessels operate in the spot market, we believe YZJ could suffer losses of US$30m per annum. We expect YZJ to show declining figures, as it has started to deliver low-priced contracts signed in 2013, and it shows stagnated order wins of bulk carriers. Maintain UNDERWEIGHT. JP Morgan (8 Jul)

Equipped with a bachelor in banking and finance, Joey covers the finance, technology and healthcare industry in Singapore.

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Valuetronics Hldgs  0.695 +0.010 +1.46%   
Business: Provides integrated electronics manufacturing services. [FY18 Turnover] Industrial & commercial electronics (51%), consumer electronics (49%).

Insight: Aug-18, 1Q19 revenue edged up 1.2% to HK$704m attr... Read More
Fu Yu Corp  0.190 +0.001 +0.53%   
Business: Co is a plastic products manufacturer. [FY17 Geographical] China (60.6%), Singapore (21%), Malaysia (18.4%).

Insight: Aug-18, 1H18 revenue improved 5.6% attributed main... Read More
Singapore Post  0.925 -0.010 -1.07%   
Business: [FY18 Turnover] Logistics (42.7%), postal (40.2%), eCommerce (17.1%).

Insight: Nov-18, 1H19 revenue rose 2.8% to $741.3m largely ... Read More
Yangzijiang Shipbuilding (Hldgs)  1.240 -- --   
Business: Co is one of the largest non-state owned shipbuilder in China. [FY17 Turnover] Shipbuilding (58.6%), trading (34.2%), investments (5.3%), others (1.9%).

Insight: Nov-18, 3Q18 revenue jumped 22.6% to Rmb5.4b despi... Read More


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