Singapore: Valuetronics Holdings/2QFY16 Results Flash Note (below consensus but within our expectations)
| Company | Share Price | Recommendation | Our target price | Within our Expectation | 2QFY16 Profit yoy | 2QFY16 Profit QoQ | Highlights of Results |
| Valuetronics Holdings | 0.42 | BUY | 0.56 | Y | -11.3% | -3.8% | See attached comments |
Valuetronics reported 1HFY16 net profit of HK$65.7m forming 49% of our full year forecast but only 44% of consensus estimates.
1) 2QFY16 net profit continued to be affected by a slowdown in the consumer electronics (CE) business, however this was partially offset by the strong growth from the higher margin industrial and commercial electronics (ICE) segment due to increase in demand from existing and new ICE cusotmers. Revenue from the ICE segment increased 27.7% yoy while CE revenue plunged 40.6% yoy.
2) Robust free cash flow generation. Cash flow generation continued to remain strong as Valuetronics generated S$17.8m (S$0.047/share) of free cash flow, boosting its net cash position to S$92.4m (S$0.243/share). If we include the Group's AFS assets (which include mostly short-term investable-grade US$ fixed-income bonds), Valuetronic will have net cash + AFS assets of S$0.284/share.
Pending our results briefing next week, we maintain our BUY recommendation and target price of S$0.56.
Link to results: http://infopub.sgx.com/FileOpen/VHL_Results%20Q2%20FY2016.ashx?App=Announcement&FileID=378080
Link to press release: http://infopub.sgx.com/FileOpen/VHL_MR%20Q2%20FY2016.ashx?App=Announcement&FileID=378081
Thanks
Andrew Chow, CFA
UOB Kay Hian Research
DID: +65-6590 6633
Email: andrewchow@uobkayhian.com
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