Innovalues

Innovalues (S$0.80): 4Q15 results in line; poised to rev forward in 2016

4Q15 results met expectations despite net profit sliding 11% y/y to $4.8m on lower FX gains.

Revenue ceded 3.7% to $26.9m due to lower orders in its automotive business (-6.5% to $21.7m), but partially offset by a stronger office automation segment (+14.4% to $5.2m).

Bottom line was hit by lower FX gains, higher staff expenses and directors’ bonus, absence of gains from sale of submerged machines, and higher deferred tax provision.

Combined final and special DPS of 2.6¢ versus 1.4¢ in 4Q14 took full year dividends to 3.8¢ (FY14: 2¢), reflecting a higher payout ratio of 53.7% (40.9%).

Longer term trends towards safer, more efficient and less pollutive vehicles, coupled with the exciting promise of electric and autonomous vehicles, are likely to drive demand for additional sensors, thereby underpinning growth for the AU business.

Car sales of US, Europe and China are also expected to remain resilient given lower interest rates, fuel cost, as well as tax cuts and policy stimulus (China specific).

Profit margins may be lifted by low steel and aluminium prices, enhanced plant automation, and cheaper labor cost.

Maybank KE maintains Buy and TP of $1.02.

Innovalues is trading at 9.8x FY16e P/E and offers a 4.8% dividend yield.