Valuetronics Holdings Limited (SGX: BN2) is an electronic manufacturing services provider that is headquartered in Hong Kong. It offers a combination of design, engineering, manufacturing, and supply chain support services for electronic and electro-mechanical products.
The company recently captured my attention due to its market-beating gains; over the last 12 months, Valuetronics’ stock price has climbed by 94%, soundly beating the Straits Times Index’s (SGX: ^STI) already impressive 17% return.
As such, I have been spending time reading its latest annual report, which is for its FY2017 (fiscal year ended 31 March 2017). In this article, I would like to share one aspect of Valuetronics covered in its FY2017 annual report that investors may be interested in: Its growth prospects.
Let’s first start with the company’s Consumer Electronics (CE) segment. In FY2017, it accounted for 43.4% of Valuetronics’ total revenue of HK$2.275 billion. Here is a paragraph from the company’s FY2017 annual report on the growth prospects of the CE segment (emphasis is mine):
“Today, we are seeing more CE products evolving and moving towards the Internet-of-Things (“IOT”) trend. Even previously traditional consumer products are being enhanced and given a new lease of life with greater connectivity. LED lighting is one such example.
In FY2017, we have broadened our CE portfolio to include smart LED lighting with IOT features, which has helped to boost our CE revenue. We expect more market penetration for these smart LED lighting products, as they are still in the initial stage of the product life cycle.”
So, for its CE segment, Valuetronics is expecting an increase in market penetration for its smart LED lighting products as the product is currently in the early stage of its lifecycle.
Next, we have the Industrial and Commercial Electronics (ICE) segment. In FY2017, the segment generated HK$1.288 billion in revenue, which was 56.6% of Valuetronics’ total revenue. Here’s what management has to say about the ICE segment’s growth prospects in the company’s FY2017 annual report (emphasis is mine):
“The growth in ICE revenue in FY2017 was mainly driven by in-car connectivity modules used in automotive industry. The Group acquired its first automotive customer in FY2016, and started supplying in-car connectivity modules to one of their automaker customers.
Through this automotive customer, we are currently undergoing qualification by another automaker, of which approval is expected by late FY2018.”
One key trend in the automotive industry today is connected cars. In this regard, Valuetronics seems to have positioned itself well to ride on any potential growth from this trend. The company indicated that it’s in the process of getting approval from another automaker for its in-car connectivity modules; if and once the approval is received, it will likely result in revenue growth for Valuetronics from FY2019 onwards.
Given all the above, we can see that Valuetronics has some clear initiatives to grow its revenue from both its CE and ICE segments in the near-term.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn't own shares in any companies mentioned.