Valuetronics’ ICE segment up for strong years ahead

Gross margins to stay above 19%.

Valuetronics is pretty much set for the long-term, with profits expected to increase gradually over the years.

According to a report by OSK-DMG, the company’s industrial and commercial electronics (ICE) segment is expected to register 20% annual revenue growth over FY16-17, with gross margins staying above 19% as it diversifies and expands its customer base. Growth in this segment would expand the group’s overall margins and lift Valuetronics NPAT over the years.

As of FY14, management has officially set a formal dividend payout policy with a similar range of 30% to 50% of NPAT.

Analysts expect Valuetronics to consistently pay out above 40% of its NPAT going forward and potentially a special dividend if it manages to do well, like in FY14. This would result in a potential dividend yield range of 8-9%.

Phillips, which OSK-DMG suspects to be Valuetronics’ largest customer, is now seeking to list and grow its lighting business – and a successful listing will be a positive catalyst for Valuetronics.