Valuetronics Holdings

Valuetronics Holdings: Results below expectations. Grp reported its 1Q13 results which saw rev of HK$634.5m (+20.4% YoY) within expectations but net profit of HK$25.7m (-18.7% YoY) missed estimates due to lower-than-expected gross margin. VHL reclassified its three reportable segments into Consumer Electronics (CE), Industrial and Commercial Electronics (ICE) and Licensing this qtr, given the blurring differences between its previous OEM and ODM segments. Strong YoY revenue growth of 36.9% in the CE segment was partially offset by weakness from its ICE (-9.0%) and Licensing (-50.4%) segments. What surprised was mgt’s decision to cease its Licensing business given significant challenges from a tepid US economy as well as strong competition. House had previously estimated this segment to achieve breakeven in FY14. VHL expects to incur total termination expenditure of HK$28m, which would be booked in 2Q13.