Excerpts from analyst's report
RHB Research analyst: Jarick Seet
 Fu Yu would continue to focus on profitability amid the challenging outlook. It declared a total DPS of SGD0.02 in FY15, representing a 14.1% dividend yield, but still generated an additional SGD23m worth of cash, building up its net cash position to SGD0.14/share, equivalent to the current share price. Going forward, management will likely continue to increase dividends gradually as it transfers excess cash back from its subsidiaries. With more right sizing exercises to improve margins, we maintain our Conviction BUY on Fuyu with a SGD0.29 TP (104% upside). |
Focusing on profitability. Despite declining revenue for the past three consecutive years, management has remained focused on profitability by performing major right-sizing and cost-cutting exercises. Going forward, management expects revenue to likely be at the bottom but it would continue to focus on profitability, especially with the challenging outlook ahead. We continue to expect GPM to improve in FY16, like it did in FY15.
 Net cash = market cap and 15.8% FY16F dividend yield. Despite paying out SGD7m worth of dividends earlier, Fu Yu’s cash level still increased by 23% YoY to SGD102.9m. Going forward, management is keen to reward shareholders with increased dividend payouts, while it continues to transfer excess cash back from its subsidiaries overseas. We forecast a robust 15.8% FY16 dividend yield. - Jarick Seet (photo) |
Key risks: USD depreciation and economic recessions.
Maintain Conviction BUY. Fuyu is a safe haven full of cash, with strong cash flow generation and high dividend yields. Management is also exploring share buyback options. Coupled with earnings beating estimates, we think that Fuyu is a no brainer in tough markets and maintain our Conviction BUY, with a DCFbacked TP of SGD0.29, implying 12.8x FY16F P/E.
Full report here.
