Valuetronics

Valuetronics: 3QFY15 net profit grew 10.3% y/y to HK$39.2m, while revenue climbed 3.4% to HK$596.2m.

Top line was driven by a 23% increase in Industrial and Commercial Electronics (ICE) segment to HK$235m from higher demand and a new customer, and offset by a 6.4% decline in the Consumer Electronics (CE) segment to HK$361.2m from a slowdown in LED lighting business.

Gross profit margin improved 0.4ppt to 14% on an improved product mix.

Other income doubled to HK$5.4m due to net exchange gain and interest received, but that was offset by administrative expenses which grew 9.8% to HK$35.3m, largely attributable to increased staff costs.

On the CE front, the aggressive pricing strategies of its major LED customer will not be reversed in the near future. Nevertheless, in the ICE segment, its new customer is currently undergoing a supplier consolidation program, to which Valuetronics sees could bring more opportunities.

Management hopes to reduce its reliance on the CE segment, and enhance its design and development capabilities, production efficiencies and inventory management.

Valuetronics is trading at 2.3x ex-cash P/E.