Valuetronics

Valuetronics: 4QFY15 net profit crept up 0.8% y/y (+1.5% q/q) to HK$39.8m, bringing full year earnings to $149.2m (+0.9%), 10% ahead of street estimates.

Revenue for the quarter was weaker at HK$578.8m (-5.6% y/y, -2.9% q/q) but full year revenue of HK$2,429.3m (-0.2%) was flat.

For the year, its core consumer electronics (CE) segment (-10.9%) saw a slowdown from its LED customers, but was mitigated by increased demand and a new customer within its industrial and commercial electronics (ICE) business (+22.6%).

Overall gross margin improved 0.2ppt to 13.6% from the change in product mix.

Bottom line was partly boosted by higher interest income (+105%), which partially offset higher staff costs in China (+11.2%).

Meanwhile, free cash flow generated remained strong, with net cash position fattening from HK$477.9m to HK$505.8m ($0.234/share).

Management maintains its guidance of continued growth in the ICE segment, supported by a bigger customer base and opportunities in the pipeline, but its CE business is expected to face aggressive competition with price reduction on mass market LED lighting products.

First and final DPS of HK$0.20 (16¢ final, 4¢ special) is maintained, translating to a 6.8% dividend yield.

At $0.51, Valuetronics trades at 8.1x and forward earnings (3.5x ex-cash) and 1.38x P/B.