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What Investors Should Know About Valuetronics Holdings Limited’s Latest Earnings

Valuetronics Holdings Limited (SGX: BN2) is an integrated electronics manufacturing services provider with its headquarters in Hong Kong. The firm was founded in 1992 and offers a wide range of design, engineering, manufacturing, and supply chain support services for electronic and electro-mechanical products. Valuetronics has two business segments – consumer electronics (CE), and industrial and commercial electronics (ICE).

Yesterday, the electronics manufacturing services provider announced its financial results for the second quarter ended 30 September 2018. Let’s look at the key takeaways from the announcement here.

1. Overall revenue inched down by 1.3% year-on-year to HK$ 716.2 million. The fall was due to lower revenue at the CE segment, which was offset slightly by the ICE segment’s higher revenue.

2. CE segment’s revenue fell mostly due to a slowdown in demand from a customer in the smart lighting business, and production disruption of its Danshui factory in China in late September caused by flash flooding. Higher sales of consumer lifestyle products slightly made up for the lower revenue. On the other hand, revenue from the ICE segment rose mainly due to an increase in demand from some of its customers.

3. Gross profit climbed 2.1% to HK$ 107.1 million, and this caused the gross profit margin to improve slightly from 14.4% to 14.9%. The improvement was mainly on the back of a change in product sales mix.

4. However, net profit tumbled from HK$ 50.8 million to HK$ 44.3 million in the latest quarter, a fall of 12.8%. The decline was attributed mainly to the lower revenue and provision of HK$13.6 million related to the flash flooding. Valuetronics added that it is making an insurance claim for damages at its Danshui factory.

5. On a half-year basis, revenue came down 0.1% to HK$ 1.42 billion while net profit fell 5.6% to HK$ 94.0 million. Earnings per share for the half year decreased from 23.6 HK cents to 21.9 HK cents.

6. As of 30 September 2018, Valuetronics had HK$ 798.2 million in cash and bank balances with no debt. In comparison, at the end of March 2018, it had a lower cash hoard of HK$ 671.1 million and zero borrowings.

7. Operating cash flow for reporting quarter came in at HK$ 133.3 million while exactly a year ago, it had negative operating cash flow. Valuetronics raked in free cash flow of HK$ 117.8 million for the latest quarter considering it spent HK$ 15.5 million in capital expenditure.

8. Valuetronics’ board of directors has declared an interim dividend of 5 HK cents per share for the second quarter, down from 7 HK cents dished out a year ago.

9. With regards to any potential impact from the US-China trade war, Valuetronics commented:

“As a manufacturer with global sales, the Group is operating in an uncertain macro-economic environment caused by geo-political and trade tensions. The US – China trade tensions, if escalated, could potentially undermine the global economy and impact the supply chains of companies serving US market. Whilst there is no material immediate direct impact on Valuetronics at this juncture, indirect and consequential impact on the Group cannot be ruled out if trade tensions were to escalate. In order to mitigate impact of tariffs on goods imported to US market, the Group has been working with customers in evaluating various measures, including the option of product assembly outside of China.”

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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.