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Valuetronics Holdings Limited’s Latest Earnings: A Strong Third Quarter

Valuetronics Holdings Limited (SGX: BN2) is an electronic manufacturing service provider with its headquarters in Hong Kong.

This morning, the firm announced its financial results for the third quarter ended 31 December 2017. Here’s a quick rundown of the financial figures from the latest quarter:

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1. Revenue for the quarter came in at HK$788.3 million, up by 34.2% year-on-year. For the nine-month period, the top line grew 34.8% to HK$2.2 billion.

2. Gross profit rose 24.9% to HK$113.7 million. For the nine-month period, gross profit went up 28.6% to HK$322.9 million.

3. Quarterly net profit went up from HK$42.9 million to HK$58.2 million, an increase of 35.7%. On a nine-month basis, the bottom line put on 42.7% to HK$157.7 million.

4. Earnings per share for the nine-month period was HK 37.2 cents, up from HK 26.4 cents a year ago.

5. As at 31 December 2017, Valuetronics had HK$640.4 million in cash and cash equivalents with no debt. Even though this is a deterioration from HK$752.9 million in cash and zero debt that it had on 31 March 2017, the balance sheet remains healthy.

6. For the quarter, cash flow from operations was HK$44.9 million and HK$8.5 million was spent on capital expenditure. Therefore, the firm brought in HK$36.4 million in free cash flow, an improvement from HK$9.3 million raked in a year ago. On a nine-month basis, Valuetronics generated a free cash flow of negative HK$16.3 million as compared to HK$38.8 million brought in one year back.

It looks like a very strong third-quarter for the electronic manufacturing service provider, which operates two business segments – Consumer Electronics and Industrial & Commercial Electronics.

The Consumer Electronics revenue surged 48.1% year-on-year to HK$401.1 million mainly due to higher demand for consumer lifestyle products and smart LED (light-emitting diode) lighting products with Internet of Things features.

Meanwhile, revenue from the Industrial & Commercial Electronics segment rose 22.3% to HK$387.2 largely on the back of increased demand from some its customers.

Chairman and managing director of Valuetronics, Ricky Tse Chong Hing, commented on his company’s latest performance:

“Despite uncertainties in the global economic environment, we have stayed focused and delivered double digit growth in revenue, gross profit and net profit for the third quarter and nine months of our financial year. Both our Industrial and Commercial Electronics and Consumer Electronics segments saw growth in the quarter due to increases in demand from certain customers. We continue to actively support our existing customers’ product development roadmaps, while simultaneously developing new customers who can benefit from our technical service, expertise and experience.”

The company warned that supply chain challenges such as raw material price fluctuations and extension of lead time in procurement are a bugbear. To mitigate the challenges, it said that it would “continue to navigate the dynamic macro-environment by sticking to its fundamentals and keeping in close touch with customers”.

Valuetronics is selling at S$0.925 currently, which translates to a trailing price-to-earnings ratio of 11 and a dividend yield of around 3%.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.