Company Overview

• Valuetronics Holdings, established in 1992 and listed on the SGX Mainboard in 2007, is a one-stop manufacturing solution provider headquartered in Hong Kong. Valuetronics offers vertically integrated services, including design, development, and full turnkey manufacturing, focusing on Consumer Electronics (CE) and Industrial and Commercial Electronics (ICE), which sets it apart from traditional Electronics Manufacturing Services (EMS) providers.

• The CE division manufactures a range of consumer products, including smart lighting, printers, temperature sensing devices, telecommunication equipment, and automotive parts.

• The ICE division provides electronics manufacturing services for industrial applications, such as network access solutions, cooling systems for high-performance computing, hardware for retail chains, medical equipment, and smart lighting for industrial use.

Headquarters and Facilities:

Established in 1992 is a one-stop manufacturing solution provider headquartered in Hong Kong. It has two main manufacturing facilities. The China Campus is located in Huizhou City, Guangdong Province, and spans 110,000 square meters, serving as a major hub for the company's manufacturing operations and design center. The Vietnam Campus is located in Vinh Phuc Province, near Hanoi, this facility covers 52,541 square meters and has been steadily ramping up its production capacity and plays a crucial role in the company's expansion strategy.

1HFY24 Financial Performance

• Revenue: Total revenue for 1HFY25 was HK$862.1 million, a slight decrease of 3.3% compared to 1HFY24. The ICE segment saw a revenue growth of 1.8% to HK$668.7 million, while the CE segment experienced a revenue decline of 17.6% to HK$193.4 million.

• Gross Profit: Gross profit increased by 4.3% to HK$144.8 million in 1HFY25 from HK$138.9 million in 1HFY24. Gross profit margin improved to 16.8% in 1HFY25, up from 15.6% in 1HFY24.

• Net Profit: Net attributable profit rose by 10.2% to HK$90.5 million in 1HFY25 from HK$82.1 million in 1HFY24. Earnings per share increased to 22.1 Hong Kong cents in 1HFY25, compared to 19.8 Hong Kong cents in 1HFY24.

• As of 30 September 2024, Valuetronics' net cash stood at HK$1,174.5 million, up from HK$1,164.5 million as of 31 March 2024. Valuetronics has adopted a formal dividend policy targeting an annual payout of 30% to 50% of net profit attributable to shareholders. The company has been generous in dividend distribution, with a payout ratio of 64% in FY2024, supported by substantial interest income

Manufacturing Capabilities:

• Surface Mount Technology (SMT): Automated placement of electronic components onto printed circuit boards (PCBs).

• Auto Insertion and Selective Soldering: Automated insertion of components and selective soldering processes for PCBs.

• Wire Bonding: Connecting Semiconductor Chips to Their Packages Using Fine Wires.

• Final Goods (FG) Assembly: Complete Assembly and Testing of Finished Products Ready for Shipment.

• CNC Machining: Precision machining of metal and plastic parts using computer numerical control (CNC) equipment.

• Injection Molding: Production of plastic parts and components through injection molding processes.

• Tool Design and Fabrication: In-house design and creation of tools and molds for manufacturing processes.

Market Position and Achievements:

• The company has successfully diversified its customer base, particularly in the Industrial and Commercial Electronics (ICE) segment, which saw 1HFY25 growth driven by new customers, including a Canadian network access solutions provider.

• AI Joint Venture: Valuetronics has invested in a 55%-owned joint venture, Trio AI Limited, to provide GPU and AI-related value-added cloud services in Hong Kong. This venture aims to leverage high-performance GPUs to deliver computing capabilities tailored for AI model development and application, positioning the company to attract new customers and explore manufacturing opportunities in the AI industry.

• Valuetronics has been recognised multiple times at the SIAS Investors’ Choice Awards, winning the Most Transparent Company Award (Technology Category) and the Singapore Corporate Governance Award (Small Cap Category) in both 2023 and 2024.

Strategic Positioning and Future Outlook:

• Focus on Technological Advancements: The company is involved in the development of new technologies, such as cooling solutions for high-performance computing environments and network access solutions. This focus on technological sophistication not only improves margins but also enhances Valuetronics' engineering and manufacturing capabilities.

• Expansion of AI Computing Capacity: Valuetronics is investing approximately HKD172 million to expand its AI computing infrastructure, increasing the capacity from 250 GPU chips to over 1,000 GPU chips. This significant expansion aims to enhance Trio AI's capabilities and capture growing revenue opportunities in AI-driven sectors.

• Strategic Partnership with Sinnet Cloud HK: The investment is made through Valuetronics' wholly owned subsidiary, Computing Assets Limited, and will be leased to Trio AI Limited, a 55%-owned joint venture with Sinnet Cloud HK Limited. This partnership positions Trio AI as a leader in high-performance computing services for commercial applications in Hong Kong.

• Leveraging Emerging AI Technologies: The capacity augmentation is critical for enabling emerging AI technologies such as generative AI and complex simulations. This positions Trio AI to pursue larger, more complex AI projects that are potentially more lucrative, further solidifying its pioneering status in the Hong Kong market.

Risks

With its 1HFY25 results in Nov, Valuetronics identified key risks in the next six months include persistent global inflationary pressures, a slower-than-anticipated pace of interest rate cuts, and heightened geopolitical instability, including the recent conflict in the Middle East.