Valuetronics : Sucessful Trade in 3 Months Timeframe

According to Bloomberg,Valuetronics Holdings Ltd. offers original equipment manufacturing and original design manufacturing services. The Company serves customers in the telecommunications, industrial, commercial electronic products, and consumer electronic products industries.

Valuetronics caught my eye in early November with a run up in price from about 0.22 to 0.24.

Further research shows that the company offered a decent dividend yield at about 5% since the company's listing in 2007. Look below for more figures:

Dividend History for Last 3 Years (Per Share/HKD):

Year 2011: HK 14 cents

Year 2012: 16 + 1 Special Dividend  = 17 cents

Year 2013 8 cents

Relatively High  Payout Ratio:

Year 2011 : 40.9

Year 2012 : 46.6 %

Year 2013 : 36.5 %

Possible High Dividends Expected

 

 

Based on the Q1, Q2 and Q3 net profit (approximate reported figures in HKD): 31,000,000 (Q1) 39,600,000(Q2) + 35,500,000(Q3) and conserative estimated of my @ 30,000,000 (Q4E), would translated to about: Net Profit 136,100,000 HKD

 Based on the historical payout ratio of  36.5% in 2013, This would translate to about (136,100,000 * 36.5%) = 49,676,500

Outstanding shares of about : 365,400,000

Possible Dividends = 49,676,500 / 365,400,000  = ~  HKD 13.60 cents  or ~ SGD 2.22 cents 

At the current price of about 27.5 to 28.5 cents, This translate to about  8% / 7% dividend rate. 




From Nov to Dec, Valuetronics traded within the trade of 0.23-0.24, where I started to accumulate. When the price hit 0.25, I knew it was gearing up and accumulated even more lots. 




At an average price of 0.25588  and at the last closing price of 0.295. This is about 10%+ profit. As of today, I have sold half my holdings to preserve profits. The other half i am holding due to potential price appreciation and expectation of a higher dividend in 2014.

However, the management of Valuetronics has previously sold down at 0.24. The current price of 0.295 may induce another round of sale from the management and investors from a year ago would be siting on unrealized profits of ~50%; which could signal a price adjustment/cap in the near term.

I wouldn't be adding anymore lots anytime soon if one is looking for a quick punt (less than 1 week). 

However, it is still a reasonable value for those looking at the longer term: Low PE of 5.73, High Dividends history, No Significance Debt, Good Cash Flow.