Singapore Exchange Ltd (SGX)

Singapore Exchange is Asia’s leading and trusted market infrastructure, facilitating the exchange of capital and ideas to create value for people, businesses and economies. As a multi-asset exchange operating equity, fixed income and derivatives markets to the highest regulatory standards, SGX is a vertically integrated business that provides listing, trading, clearing, settlement, depository and data services.

With about 40% of listed companies and over 80% of listed bonds originating outside of Singapore as well as established linkages across the region and in Europe, SGX is Asia’s most international and connected exchange. Offering a full suite of derivatives products across Asian equity indices, commodities and currencies, SGX is the world’s most liquid international market for the benchmark equity indices of China, India, Japan and ASEAN.

As Asia’s pioneering central counterparty, SGX is globally recognised for its risk management and clearing capabilities, and was one of the first globally to adopt the Principles for Financial Market Infrastructure.

Headquartered in AAA-rated Singapore, SGX has over 800 employees including offices in Beijing, Chicago, Hong Kong, London, New York, Mumbai, San Francisco, Shanghai and Tokyo.

Asia’s leading multi-asset exchange

SGX Market Strategist, Equity & Fixed Income, Singapore Exchange Ltd (SGX)

Geoff Howie

SGX Market Strategist, Equity & Fixed Income

Equity Bottom-Up

<div><em><strong>Non- SGX Report: These equity research reports are not written by the SGX.</strong>&nbsp;SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.</em></div>
<div></div>
<div>
<div>
<div>
<div>
<p>Singapore Company Update</p>
<h2>Valuetronics Holdings</h2>
</div>
</div>
</div>
</div>
<div>
<div>
<div>
<div>
<h3>Wait for the turning point</h3>
<div>
<div>
<div>
<p><strong>Investment Thesis:</strong><br>Strong balance sheet, deep discount to peers. Valuetronics has cash of HK$1.2bn (c.70% of market capitalization) and no borrowings. It is currently trading at 10.3x/9.4x FY22/23F PE, which is at a deep discount to its peer average of 17.6/15.0x.</p>
<p><strong>Headwinds to persist in FY22F</strong>. The loss of its automotive customers’ business in the US in FY22F will be inevitable and significant. In addition, component shortages may result in a delay in order fulfilment and higher costs.</p>
<p><strong>Wait for the turnaround.</strong> We believe in holding on to Valuetronics due to its strong financial position and attractive valuation. In our view, the company will be at the cusp of turning around by end-FY22F with the completion of its Vietnam plant and continued tailwinds from the logistics and e-commerce industries.</p>
<p><strong>Valuation:</strong><br>Maintain HOLD with a higher TP of S$0.60. Our TP is pegged to 9.7x (4-year average) FY22F earnings. It is currently trading at 10.3/9.4x FY22/23F forward PE which is below its peer average of 17.6/15.0x.</p>
<p><strong>Where we differ:</strong><br>We believe in the value of holding on to Valuetronics given its strong balance sheet, deep discount to peers, and eventual turnaround story when its Vietnam facility completes, and US business development bears fruit.</p>
<p><strong>Key Risks to Our View:</strong><br>Protraction of the COVID-19 pandemic, re-escalation of the US-China trade war, customer concentration risk, cut in dividends.</p>
</div>
</div>
</div>
</div>
</div>
</div>
</div>

Non- SGX Report: These equity research reports are not written by the SGX.&nbsp;SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.





Singapore Company Update
Valuetronics Holdings








Wait for the turning point



Investment Thesis: Strong balance sheet, deep discount to peers. Valuetronics has cash of HK$1.2bn (c.70% of market capitalization) and no borrowings. It is currently trading at 10.3x/9.4x FY22/23F PE, which is at a deep discount to its peer average of 17.6/15.0x.
Headwinds to persist in FY22F. The loss of its automotive customers’ business in the US in FY22F will be inevitable and significant. In addition, component shortages may result in a delay in order fulfilment and higher costs.
Wait for the turnaround. We believe in holding on to Valuetronics due to its strong financial position and attractive valuation. In our view, the company will be at the cusp of turning around by end-FY22F with the completion of its Vietnam plant and continued tailwinds from the logistics and e-commerce industries.
Valuation: Maintain HOLD with a higher TP of S$0.60. Our TP is pegged to 9.7x (4-year average) FY22F earnings. It is currently trading at 10.3/9.4x FY22/23F forward PE which is below its peer average of 17.6/15.0x.
Where we differ: We believe in the value of holding on to Valuetronics given its strong balance sheet, deep discount to peers, and eventual turnaround story when its Vietnam facility completes, and US business development bears fruit.
Key Risks to Our View: Protraction of the COVID-19 pandemic, re-escalation of the US-China trade war, customer concentration risk, cut in dividends.








(Non-SGX Report) Valuetronics Holdings: Wait for the Turning Point