• Maintain BUY with unchanged Target Price of SGD0.92, 46% upside, as we came away positive after the analyst briefing with management.
• The 15.6% y-o-y decline in its CE segment due to a slowdown at its’ major customer, Phillips, was mitigated by a 15.2% increase in its ICE division on higher margins, driven by in-car connectivity modules used in the automotive industry. The CE segment is expected to pick up as its major customer is expecting more product sales following the winding down of inventory by their trade partners to more normalised levels.
• Valuetronics’ FY19F dividend yield of 7.9% is attractive.

Industrial and Commercial Electronics (ICE) Expected to Grow at High Single to Low Double-digit Level Y-o-y

Valuetronics’ automotive segment is likely to continue growing at high double-digit y-o-y, with margins maintaining due to increased volumes and efficiency. 

In 2Q18, ICE grew 15.2% y-o-y mainly driven by in-car connectivity modules used in the automotive industry. In addition, its sensing and printer segments will likely continue to grow at high single-digit y-o-y. 

However, its telecoms segment is expected to continue to weaken as its customers are facing lower demand for their products. 

All in, we expect the ICE operations to grow at 8-10% y-o-y for FY19F.

Source: RHB Invest Research - 14 Aug 2018