Valuetronics’ share price rise 2.48% in relief as Trump delays China tariffs

Electronics manufacturer Valuetronics Holdings’ share price gained 2.48% on Wednesday afternoon, reacting positively to the delay from the United States (US) in tariff hikes on some Chinese goods. This is even after the firm posted a 3.1% fall in net profit for the first quarter on the same day, at HK$48.1 million (S$8.5 million), from HK$49.7 million a year ago.

As of Wednesday’s share price of S$0.62, the Singapore mainboard-listed group’s stocks have fallen 6% year-to-date, from S$0.66 on January 2, 2019.

Prior to the trade tensions between China and the US which occurred late last year, Valuetronics shares were trading at around S$0.75 per share. For context, during the electronics upcycle which took place around 2017 to early 2018, the group’s shares had soared to as high as S$1.08.

For the first quarter, the group posted a 7.1% fall in revenue to HK$654.3 million due to weaker consumer and business confidence in the uncertain macro environment.

The Hong Kong headquartered firm said that the escalating trade tensions between China and US will continue to affect the group’s operations negatively as almost half (45%) of the group’s revenue came from shipments to the US during its first quarter, and around half of its US shipments from China were subjected to the 25% tariff imposed on its customers in the US.

On Tuesday the threats to impose an additional 10% of tariffs on some Chinese goods such as laptops and cell phones were postponed to mid-December from the earlier slated date of September 1.

The delayed tariff hike provides respite to electronics and manufacturing firms like Valuetronics while these firms adopt strategies to mitigate the risks faced from being dependent on China as a key manufacturing hub.

More and more customers are deploying diversified procurement strategies, such as adopting and/or evaluating options of assembling their products outside of China due to the trade tensions, Valuetronics said.

The group said its Vietnam expansion is progressing as planned. The leased site in the country has been qualified by a customer and the mass production has begun since June 2019, with shipments made from Vietnam to the US market, it added.

‘Our leased facility in Vietnam has been qualified by our customer and shipments to US have already started. This alternative option in Vietnam that we have provided is part of our value-added service to customers that are looking at diversifying their manufacturing footprint outside of China,’ said chairman and managing director of Valuetronics Ricky Tse.

Going forward, Valuetronics has plans to acquire a plot of land in an industrial park in Vietnam, to build its own manufacturing campus there to cater to the needs of its customers.