Last October, I have written my reason for buying Valuetronics. You can read about it here. Since then, it has reported a strong 3Q results and I have browsed through the last ten years report and crunched its numbers.
At first look, you will see that both its revenue and net profit are lumpy with a few good years and then followed by a few bad years. I believe this is the nature of manufacturing business as it is dependent on their customers’ performances. Compare to a decade ago, its revenue is higher by about 2.5 times, while net profit has increased by about 1.8 times. Nothing to crow about when the CAGR of its net profit is only 5.9%.
The good thing is the company has remained profitable for the past 10 years. Its net profit margin is above 6% for the past 3 years. I might be wrong but I think that is pretty decent for manufacturing. Its ROE has dropped from 20+ % to mid teens over the last few years but that is still a pretty good return. The best number is its cash holding which has increased by 3.6 times over the past decade and this has resulted in the increase in its declared dividend by 3 times.
My general perception after browsing through the annual reports is that the company is growing well with nimble management who strategise well to improve the company, especially since 2010. Some strategies are:
- Starting Lean Manufacturing Programme and expansion of Daya Bay Plant in 2010.
- Reclassification of its business from OEM/ODM to CE/ICE products and improving productivity with automaton in 2013.
- Exiting from mass market LED light bulbs from 2015.
- Getting a new revenue stream from the automotive industry.
- From the latest 3Q report, a new driver in CE – wireless LED.
I think all these bode well for the company and hence my added position in this company. Looking forward to a good 4Q and 2017 results and hopeful for a special dividend since this will the company’s 25th anniversary.