Gladiolus Lane

Business 101

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Headquartered in Hong Kong, Valuetronics Holding Ltd was established in 1992 and listed in SGX in 2007. It is a provider of Electronics Manufacturing Services (EMS) with two key portfolio, namely Consumer Electronics (CE) and Industrial & Commercial Electronics (ICE).

Products include smart lighting products, printers, temperature sensing devices, communication products, and automotive products. 

Geographical coverage includes America, Europe and Asia Pacific. 

Manufacturing sites are based in :

• Huizhou City, China - in a 110,000 sqm China Campus 

• Binh Xuyen District, Vietnam - a 4,000 sqm leased factory

• Binh Xuyen District Industrial Park - 52,541 sqm Vietnam Campus

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Business History

 

Between FY-Mar-2006 to 2011; portfolio were classified as OEM and ODM where consumer electronics activity dominates. 

Portfolio was reclassified into CE and ICE from FYMar12. 

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In Mar-2010, the company started licensing business for Whirlpool, Maytag and Amana brand. The firm eventually exit this licensing agreement in Aug-2012 at a loss of $13M. 

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CE revenue mix was 73% and ICE 27% in FYMar12. Margin were 13.4% and 13.9% respectively. However CE margin gradually eroded to about 10% and in FYMar22, it started to fall towards 6.5%. 

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During this periods, management started to switch focus on growing ICE portfolio with improving margin with focus on the automative segment.

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As seen on the charts, this business decision resulted in substantial earning growth from ICE segment and the financial market took notice. 

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Trade War and Covid-19

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However, trade war between U.S. and China under the Trump presidency gradually began to impact Valutronics with major automotive customers moving operation to U.S. vendor; representing 15% ~ 20% of revenue. Though the transfer was delayed, it eventually took effect in FYMar22 and profitability took a hit. 

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The company response to the changing political climate by shifting part of her operations to neighbouring Vietnam to avoid tariff in the U.S. market and to rebuild her customer base. 

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Unfortunately, Covid-19 also took a toll on business and Vietnam factory setup during these periods. 

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Opinion

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Valuetronics is a well managed company. Am particularly impressed with management courage to end the consumer electronics licensing deal early in 2012. This decision was a catalyst that led to earning growth the next few years.