Valuetronics

Solid uptrend in price today, ex bonus at 78c, driven by the strong FY 16/17 results. Management outlook is upbeat and both business segments are poised to grow further.

Association with Delphi bears watching and the Pinnacle Award for Supplier Excellence is a huge endorsement for Valuetronics. Notably, the company has noted “we have a widening product portfolio, especially with the smart lighting products with Internet-of-Things (“IOT”) features and our steadily growing automotive business, with another automaker of our existing customer in the process of qualifying us.”

For those who are familiar with the concept of “moat” investing, Valuetronics may just fit in.

dun forget downside risks

1) China property slowdown and spillover to global growth.
2) Auto sales has started declining in China.

Quarterly results are lagging..

dun forget half year ago why it was trading at 50c level. After strong rally in manufacturers this quarter big drop can be fast and furious as well. Locally Manufacturing numbers already down from bouyant 1Q and China Manufacturing PMI is showing decline to 50.2 last reading. Next week reading will likely be negative.

Please dun talk about moat investing with small caps, especially one that is basically in a commodity like business. If it become big blue chip like Apple or Samsung, then maybe you can start talking about "moat".

It is obvious that you are not familiar about this group’s business model and what they are involved in. Have you studied its financial performance for the past 5 years?. Have your read the latest management update and to understand its implications?. Do you analyse the trends of its twin business segments?.

To equate size with moat is rather shallow. Suggest that you do proper research before commenting.

Valuetronic about 1 year ago was trading below 40 cents.
As point out about half a year ago Valuetronic was trading at 50 cents and increased of more than 20%.
Valuetronic recently trading as high as 83 cent ex bonus which was another increased of about 80%.

Why is Valuetronic share price increased by more than 100% in about a year?

1. The main reason is business turnaround. Quarterly revenue and net profit had increased:
1st Quarter 2017 revenue/net profit = HK$477.5m/HK$29.1m
2nd Quarter 2017 revenue/net profit = HK$573.7m/HK$38.1m (+20.1%/+18.2%)
3rd Quarter 2017 revenue/net profit = HK$587.6m/HK$42.9m (+2.4%/+70%)
4th Quarter 2017 revenue/net profit = HK$636.1m/HK$44.1m (+8.2%/2.8%)
FY 2017 revenue by 11.5% and /net profit increased by 27.9%.

2. Valuetronic strong cash generative business.

3. Valuetronic solid balance sheet with cash HK$752.9 millions

4. The ICE segment continued its fourth consecutive year of double digital growth in FY2017. The strong growth was mainly driven by in-car connectivity modules used in automotive industry.

5. The Group acquired its first automotive customer in FY2016, and started supplying in-car connectivity modules to one of their automaker customers. Through this automotive customer, the Group is currently undergoing qualification by another automaker and approval is expected by late FY2018.

6. Both the smart lighting with IOT features and in-car connectivity modules are examples of increased mobile connectivity in day-to-day applications, in tandem with the global trend towards IOT. Moving forward, Valuetronics will ride on the opportunities presented by the confluence of technology under the emergent IOT trend in order to expand its product portfolio.

Valuetronic will continue to strive for profitability growth and operational excellence in order to enhance shareholders value. However, like most manufacturers, Valuetronics is currently operating in an uncertain macro-economic environment, and continues to be mindful of possible business impacts, such as fluctuations in raw material price and procurement lead times.

The key for us is to manage our risk and with dividend of HK20 cents, more than 4% is still good incentive to hold onto this stock.

Every business model will have its share of operating risk and it depends on how the BOD and management manage this risk.

As far as I am concerned the Group is very well managed and led – as evident by its ability to adapt, evolve and strengthen its business model on both business segments.

The returns generated for its shareholders are immense and the BOD and management have to be congratulated for their excellent stewardship.
I invested in Valuetronics about 4 years back and have held on and added my position.

Valuetronics is in a positive growth phase and also given its strong financial position, I intend to hold on to this investment for a long time.

Lotustpsll I believe you had invested in Valuetronic 4 years back bought below 20 cents and is now trading at about 80 cents ex bonus, well done.
As for me I bought into Valuetronic slightly more than a year ago at below 40 cents. I’m also prepare to hold onto this stock for a long time as long as the business continue to growth. Yield at this price is more than 4% and is trading below 10x PE ex cash.

As you had mentioned ‘every business model will have its share of operating risk and it depends on how the BOD and management manage this risk’. There is never a better time to invest in solid business. Being able to sit through the storm is the way to invest successfully.