Valuetronics Holdings Limited (SGX: BN2) is an integrated electronic manufacturing service provider headquartered in Hong Kong. It offers a combination of design, engineering, manufacturing, and supply chain support services for electronic and electro-mechanical products.
The company recently published its annual report for the year ended 31 March 2018 (FY2018). Given that reading an annual report is one of the best ways to keep up with a company’s developments, I decided to go through Valuetronics’ latest annual report to understand the company’s prospects, and how it had performed in the previous year.
Generally, when reading an annual report, I will pay close attention to the letter to shareholders that the company’s chairman and/or CEO writes. In this article, I will look at an area that I found interesting, which is FY2019’s business outlook.
Industrial and commercial electronic (ICE)
To start with, Valuetronics expects its future growth of industrial and commercial electronic segment to be driven by its automotive products. Here’s what the company said in its annual report:
“The Group expects automotive products to continue to remain as the primary driver for ICE growth with the increasing demand for in-car connectivity. The Group’s automotive customer has recently undergone a corporate restructuring to become a technology company focusing on active safety, autonomous driving, enhanced user experiences and connected services. As such, the Group will further pursue opportunities in the future of mobility by providing vertical integrated services with its design and development capabilities.”
In all, investors should expect this part of the business to continue to grow for the foreseeable future as a result of trends like autonomous driving and advanced driver-assistance systems, or ADAS.
There are two halves to this segment of Valuetronics’ business. On the positive side, it expects the consumer lifestyle products to grow. Here’s what the company said:
“The Group remains optimistic on the growth prospects of consumer lifestyle products as its customer continues to launch new series of innovative products and increase their penetration in new markets including China.”
Yet, it expects to face some challenges in its smart LED lighting products business, as mentioned below:
“However, the Group is conservative on smart LED lighting products, as its customer has signalled in their recent financial results disclosure of lower sales allowing for inventory reductions at their trade partners for the first quarter of the year, which will inevitably impact the Group’s sales in the financial year ended 31 March 2019 (“FY2019”). However, the customer in the same disclosure also indicated their confidence in the long-term growth of smart LED lighting products and expects sales to normalise in the second half of 2018, which corresponds to the second and third quarters of the Group’s FY2019.”
In all, Valuetronics has guided a mixed outlook for the coming financial year. On one hand, it expects growth in its automotive and consumer lifestyle businesses. Yet, it expects a weaker performance in its smart LED lighting business.
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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 Lawrence Nga doesn’t own shares in any companies mentioned.