(19-02-2014, 05:13 PM)Investmentrealm Wrote: [ -> ]I bought this counter at 20 cents last aug after I studied the first quarter report. However, at current price of 28, I still think it has not reach its full potential. Anyone has a target price for Valuetronics? I am expecting dividends of at least 3 cents this year with the cash pile they are holding.
I value it at one times its book value, however S-chips historically tend to trade at a discount to book.
Yeah the dividends is very attractive.
(19-02-2014, 06:04 PM)felixleong Wrote: [ -> ] (19-02-2014, 05:13 PM)Investmentrealm Wrote: [ -> ]I bought this counter at 20 cents last aug after I studied the first quarter report. However, at current price of 28, I still think it has not reach its full potential. Anyone has a target price for Valuetronics? I am expecting dividends of at least 3 cents this year with the cash pile they are holding.
I value it at one times its book value, however S-chips historically tend to trade at a discount to book.
Yeah the dividends is very attractive.
Is Valuetronics considered a S-chip? If I'm not wrong, it's a HK based company.
I would value it slightly above book value. Although for most manufacturing companies, they normally trade below book value. Main reason is because Valuetronics has zero bank debt and has almost 18 cents per share of cash on hand.
My take: good to buy
reasons to buy:
- low gearing, good cashflow,strong profit, undervalued, strong technical chart
dont take my word for it, look at their P&L see for yourself you know what is say is 100% true
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This could be the next Venture Corp...who knows...
I personally think that such OEM producers has their margin squeezed tightly by the the competitive nature of the industry , thus i share the same views as felixleong. Nevertheless the company is really attractive now with its almost impeccable financials (after fully written off the loss making business) and low p/e moving forward..
if it is producing a cash flow i find it rather strange that valuation is based on book value.
and can we dont taint this by posting a chart?
this industry is a bit cyclical, its hard to predict earnings and cash flow
currently its on a uptrend because of the recovery in Europe, Philips is doing very well and their sales rebounded.
If u wanna value via cash flow of valuetronics, u can take the recent 5 year numbers or whatever long u think one cycle is to get the average yearly cash flow or earnings, you then might wanna pay anything from 5 to 10 times that multiple for this business.
I use book value because its simple to understand, it doesn't make sense to pay above book value for a mediocre business. It may make sense to pay a few times book value for superb business with wide and deep moats such as Coke or See's Candy, but for competitive industry with low margins it can't never be wise to pay too much.
If I really had to to value via cash flow... I would say a fair value for valuetronics would be around 8-10 times free cash flow, I would buy at 5 times... (need some margin of safety)
You want to buy it cheap because of certain risks and downsides such as
1) The major customer Phillips shifting business to other manufacturers to save cost
2) Management blowing cash away in expensive acquisition
3) Management diluting shareholder's stake by giving themself free stock options every year (they have been doing this for a long time)
i think i did this exercise previously. conservatively take the 5 year average net profit, give a 10-20% discount to that figure and see if the earnings yield is attractive. it may include net cash so its net cash earnings yield could be much lower.
(22-02-2014, 03:56 PM)Drizzt Wrote: [ -> ]i think i did this exercise previously. conservatively take the 5 year average net profit, give a 10-20% discount to that figure and see if the earnings yield is attractive. it may include net cash so its net cash earnings yield could be much lower.
That's great, so base on that how do u see the fair value of valuetronics as? At the current price still okay to buy?
Recently a lot of discussion on s chips. I would like to ask. What if valuetronics's cash is not real? What if its real but they will never pay the extra cash to shareholders? In such a case how would your valuations be different?