Maybank Kim Eng Research has taken a renewed liking for electronics and manufacturing services provider, Valuetronics.
"We believe value has emerged following a 22% share price correction in Value’s share price since it announced its FY2020 results,” says analyst Lai Gene Lih in a September 29 note.
“We believe a key risk is we may have underestimated the rate of earnings decline in FY21E, or overestimated the rate of recovery in future years,” she adds.
For its FY2020 ended March 31, the company had posted a 10.3% year-on-year decline in its earnings to HK$178.9 million ($31.4 million). This follows lower customer demand due to a combination of factors such as the Covid-19 pandemic, escalating US-China trade tensions and an overall global economic downturn.
See: Valuetronics FY20 earnings fall 10.3% to $32.5 mil on lower customer demand due to 'toughest business environment' since history
Still, the recent correction in Valuetronics’ share price has pushed Lai to upgrade her call on the counter from “hold” to “buy” at a target price of 66 cents. This is up 29% or 13 cents from her previous 53 cent call.
Lai’s liking for the counter also stems from its compliance with applicable laws and regulations on the environment, anti-competitive behaviour and requirements on health and safety.
For instance, it has achieved an ISO 14000 Environmental Management accreditation since 2008, and it plans to obtain the accreditation in 2021 for its leased plant in Vietnam.
Meanwhile, Valuetronics has a dedicated whistleblowing hotlines and reports are escalated to senior management immediately. It also has measures to ensure that information of internal and external stakeholders are kept confidential, Lai observes.
She also notes that it is “an equal-opportunities employer” in terms of its treatment to both its staff and suppliers.
As at 3.52pm, shares of Valuetronics were flat at 56.5 cents.
