Valuetronics announced that its earnings for 1HFY2023 ended September came in at HK$57.9 million ($10.2 million), a 2.2% increase from HK$56.6 million a year ago.

 

This came on the back of revenue increasing by 3.6% y-o-y to HK$1.1 billion.

 

Industrial and Commercial Electronics revenue increased by 15.9% y-o-y to HK$805.5 million, mainly contributed by the increase in demand from some of the group&rsquo s industrial and commercial electronics customers.

 

Consumer Electronics revenue decreased by 23.0% to HK$246.0 million, mainly due to the softening demand in end-markets.

 

The group&rsquo s gross profit margin also decreased from 14.2% to 12.5%, eroded by higher component prices due to tight supply, and the Covid-19 lockdowns of major cities in China which disrupted supply chains and impacted productivity.

 

Cash and cash equivalents for the end of the period stood at HK$979.3 million.

 

The group declared an interim dividend of 4 HK cents per share, unchanged from the same period a year ago.

 

On the outlook, chairman and managing director Ricky Tse Chong Hing says: &ldquo All our facilities in Vietnam are now fully consolidated at our Vietnam campus and this allows us greater operational efficiencies and economies of scale. As more customers are now able to visit our Vietnam campus with global travel resuming, we are confident that we will be able to convert these leads to new business in FY2024. Nevertheless, we are still facing multiple headwinds such as the Russia-Ukraine conflict, rising geopolitical tensions, hiking interest rate, dampening business sentiment and consumer spending.&rdquo

 

&ldquo Our strong fundamentals in terms of our manufacturing experience and capabilities in different countries, strong cash flows, and robust balance sheet with zero debt, will help us weather the challenges ahead and put us in a good position to also capture emergent opportunities,&rdquo he adds.

 

RHB has upgraded Valuetronics : BN2 +0.94% to &ldquo neutral&rdquo from &ldquo sell&rdquo on a recovering outlook, although it remains cautious of ongoing headwinds brought on by issues such as supply chain and component shortages. 

 

The research house&rsquo s target price on the stock has been left unchanged at S$0.53, which was the counter&rsquo s trading price as at 2 pm on Wednesday (Jun 8). 

 

In his report, RHB analyst Jarick Seet said he believes &ldquo the worst may be over&rdquo for Valuetronics after the group &ldquo (endured) a tough&rdquo FY2022, which Seet said is expected. 

 

The analyst remains cognisant of ongoing issues including higher component prices and increased labour and operating costs, which may contribute to a likely decline of revenue from the consumer electronics (CE) segment. 

 

As such, he believes Valuetronics&rsquo gross profit margin will continue facing pressure in the near term.  

 

However, in the longer-term, Seet anticipates the industrial and commercial electronics (ICE) segment to rebound from newly-acquired customers who are likely to contribute positively in 2023. He also noted that the group is currently preparing for the trial production for newly-acquired customers - and therefore believes &ldquo all is not lost&rdquo despite the expected headwinds. 

 

&ldquo All in, we still expect the effect to be a net positive as the industrial and commercial electronics segment yields better margins and profitability,&rdquo said Seet. 

 

The analyst also expects the group to continue rewarding shareholders considering continued management share buybacks and a positive past track record.

 

Meanwhile, Valuetronics&rsquo latest set of FY2022 results exceeded UOB Kay Hian&rsquo s (UOBKH) expectations, although the research house said it remained cautious on the stock&rsquo s outlook. 

 

UOBKH has maintained its &ldquo hold&rdquo call on the stock with an unchanged target price of S$0.52.

 

In a separate report on Tuesday, analyst John Cheong pointed out that supply chain bottlenecks are expected to last beyond 2022 - on top of other uncertainties including the Covid-19 pandemic and US-China trade tensions.

 

This has resulted in UOBKH lowering its gross margin assumption slightly by 0.1 percentage point to 13.7 per cent in FY2023, and 13.6 per cent in FY2024. 

 

Although Cheong is expecting the company&rsquo s newly-acquired ICE customers to contribute positively to revenue in FY2023, he thinks FY2022&rsquo s revenue rebound in the CE segment will not continue in the following fiscal year due to lower customer forecasts and shortage of components. 

 

The analyst has raised his overall revenue assumptions by 13 per cent to account for higher average selling prices to pass on extra input costs, resulting in an 8 per cent increase in earnings forecasts for FY2023 to FY2024. 

 

Cheong also remains positive on Valuetronics&rsquo ongoing expansion plans in Vietnam, which remain on track despite the Covid-19 pandemic. 

 

Citing the group&rsquo s recently-constructed Vietnam campus in Vinh Phuc, the analyst believes this will &ldquo serve as a reference&rdquo for other customers on the readiness and scalability of the project. 

 

VALUETRONICS Valuetronics: BN2 -3.39%, an electronic manufacturing service provider, on Wednesday (Nov 10) posted a 38.1 per cent drop in net profit for the first half ended Sep 30.

 

Severe shortages of certain key electronic components have affected the group' s ability to meet orders, leading to a decline in revenue and a corresponding decrease in profit, said Valuetronics chairman and managing director Ricky Tse Chong Hing in a press statement.

 

Net profit for the 6 months ended September 2021 stood at HK$56.6 million (S$9.8 million), compared with HK$91.5 million a year ago.

 

Earnings per share was HK$0.13, versus HK$0.21 previously.

 

Revenue was down 7.3 per cent to HK$1 billion, from HK$1.1 billion posted in the year-ago period. 

 

The consumer electronics segment fell 12.5 per cent year on year to HK$319.4 million, from HK$365.1 million, mainly due to the cancellation and deferral of customer orders as a result of the components shortage. 

 

Meanwhile, the group' s industrial and commercial electronics (ICE) segment dropped 4.8 per cent to HK$695.1 million, from HK$729.8 million in the year-ago period. It saw a " significant drop" in sales to an automotive consumer who switched their production from Valuetronics' s factory to another vendor in North America. 

 

Revenue growth from a printer customer and sensing devices customer helped offset ICE customer orders affected by the components shortage, Valuetronics noted. 

 

The board has declared an interim dividend of HK$0.04 per share, to be paid on Dec 3 after books close on Nov 24.

 

Although Tse expects the global components shortage to affect the group in the near term, he noted that Valuetronics' expansion plan in Vietnam is on track. The Vietnam campus is scheduled to go into mass production by end-FY2022 after passing ISO customer audits.

 

" There have been positive responses from potential customers regarding our regional manufacturing footprint strategy, and we are cautiously optimistic about revenue contributions from these new opportunities in the financial year ending Mar 31, 2023," he said.

 

Potential customers include a hardware provider for retail chain stores, and a customer providing cooling solutions for high-performance computing environments.

 

" The group is in the midst of finalising business terms with these potential customers, and this is subject to the constraints in supply chain which may affect the production ramp-up," Valuetronics said.