Simons Trading Research

Author: simonsg   |   Latest post: Wed, 26 Feb 2020, 3:51 PM


Fu Yu Corp - Moulding for Growth

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  • Turnaround in manufacturing across all regions.
  • Favourable shift in product mix towards higher profitability and growth potential.
  • Improving margins; high cash level (0.11 Scts/share) and attractive yield at 6.4%.
  • Initiate with BUY.

Turnaround in Manufacturing Across All Regions

  • Manufacturing PMIs in China, Singapore, and Malaysia, where FU YU CORPORATION (SGX:F13)’s manufacturing facilities are located, are indicating an expansion in the manufacturing sector. We believe that this will lead to an uptick in earnings for Fu Yu.

Emphasis on Products With Higher Profitability and Growth Potential

  • Part of Fu Yu’s business strategy is to shift towards producing parts for products in the consumer, medical, and automotive space, which have higher profitability and growth potential, as compared to printing and imaging segment.

Cost Efficiency to Improve Margins

  • Fu Yu is also expanding its margins through cost enhancement initiatives. The redevelopment of its Singapore factory and consolidation of its China operations in Shanghai and Suzhou will further lift normalised net profit margins to 8.2% in FY2020F, from 5.4% in FY2018.

Strong Financial Positioning

  • Fu Yu has a high cash level and no debt. Its cash level is equivalent to 44.1% of its market capitalisation and 37.7% of total assets.
  • It has an attractive dividend yield of 6.4% in FY2019F and TTM EV/EBITDA of 4.4x, vs peers of of 6 to 7x.
  • Summary of analysis to be updated. Meanwhile, click on the view full report button below for complete analysis.

Source: DBS Research - 15 Jan 2020

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Labels: Fu Yu

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