Valuetronics

Business 101

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

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.

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.

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%.

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

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

Trade War and Covid-19

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.

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.

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

Opinion

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.