Valuetronics Holdings

[RachelProp]

Buying opportunity for investors as Valuetronics hovers near 'crisis valuations'

https://www.theedgesingapore.com/capital...valuations

[¯|_(ツ)_/¯]

Valuetronics FY Result as at 31 Mar 2021
Rev HK$2b (vs 2b)
GP  HK$386m (vs 362m)
NP  HK$187m (vs 178m)
Div HK16cents (vs 14)
https://links.sgx.com/FileOpen/VHL-Resul...eID=668362

Mr Ricky Tse Chong Hing (“ 谢 创 兴 ”), Chairman and Managing Director of Valuetronics commented: 
"With the loss of orders from customers switching their supply chain to other countries due to Sino-US trade tensions, compounded with the uncertainties resulting from the global components shortage and evolving COVID-19 pandemic, the Group’s financial results for FY2022 are expected to be significantly lower compared to FY2021. On the other hand, our Vietnam expansion is proceeding according to schedule during the year. We are targeting the new Vietnam campus to commence production by the end of FY2022. By then, we will be fully equipped to serve customers’ multi-site production strategy as a means to mitigate Sino-US trade tensions, and we will be seeking out new opportunities emerging with our extended geographic footprint.

Stay home and stay safe, everyone.

[DCF]

Valuetronics FY Result as at 31 Mar 2021
Rev HK$2b (vs 2b)
GP  HK$386m (vs 362m)
NP  HK$187m (vs 178m)
Div HK16cents (vs 14)
https://links.sgx.com/FileOpen/VHL-Resul...eID=668362

Mr Ricky Tse Chong Hing (“ 谢 创 兴 ”), Chairman and Managing Director of Valuetronics commented: 
"With the loss of orders from customers switching their supply chain to other countries due to Sino-US trade tensions, compounded with the uncertainties resulting from the global components shortage and evolving COVID-19 pandemic, the Group’s financial results for FY2022 are expected to be significantly lower compared to FY2021. On the other hand, our Vietnam expansion is proceeding according to schedule during the year. We are targeting the new Vietnam campus to commence production by the end of FY2022. By then, we will be fully equipped to serve customers’ multi-site production strategy as a means to mitigate Sino-US trade tensions, and we will be seeking out new opportunities emerging with our extended geographic footprint.

Stay home and stay safe, everyone.

Dividend increase a bit  Guidance for 2022 to be worst than 21

[weijian]

So in essence, the company is diversifying its contract manufacturing business into providing "AI-as a service". So, it will be the one providing the capital, while the minority partner SinnetCloud HK provides the operating expertise.

Valuetronics enters the AI industry with new JV partnership

VML and SinnetCloud HK have agreed to establish a joint venture to carry on the business of providing GPU (graphic processing unit) and AI (artificial intelligence) related value-added cloud services in Hong Kong Special Administrative Region

VML: VML shall procure the lease of the leased equipment to the Company on the terms and subject to the conditions set out in the Equipment Leasing Agreement.

SinnetCloud HK:
(a) SinnetCloud HK shall be responsible for assisting the JV Company in its day-to-day management and operations of its business.
(b) SinnetCloud HK shall be responsible for assisting the JV Company in its application and procurement of the requisite permits and licenses required to carry on its business;
© SinnetCloud HK shall use its best endeavours to assist the JV Company in securing certain anchor customers; and
(d) SinnetCloud HK agrees and acknowledges that its involvement in the JV Company is critical to the success of the JV Company and its business and undertakes to provide assistance and support to the JV Company to the best of its abilities.

https://links.sgx.com/FileOpen/VHL-Entry...eID=807444

[weijian]

So in essence, the company is diversifying its contract manufacturing business into providing "AI-as a service". So, it will be the one providing the capital, while the minority partner SinnetCloud HK provides the operating expertise.

Valuetronics enters the AI industry with new JV partnership

VML and SinnetCloud HK have agreed to establish a joint venture to carry on the business of providing GPU (graphic processing unit) and AI (artificial intelligence) related value-added cloud services in Hong Kong Special Administrative Region

VML: VML shall procure the lease of the leased equipment to the Company on the terms and subject to the conditions set out in the Equipment Leasing Agreement.

SinnetCloud HK:
(a) SinnetCloud HK shall be responsible for assisting the JV Company in its day-to-day management and operations of its business.
(b) SinnetCloud HK shall be responsible for assisting the JV Company in its application and procurement of the requisite permits and licenses required to carry on its business;
© SinnetCloud HK shall use its best endeavours to assist the JV Company in securing certain anchor customers; and
(d) SinnetCloud HK agrees and acknowledges that its involvement in the JV Company is critical to the success of the JV Company and its business and undertakes to provide assistance and support to the JV Company to the best of its abilities.

https://links.sgx.com/FileOpen/VHL-Entry...eID=807444

Valuetronicṡ made 166mil HKD in the last audited FY25 and as per 2024's announcement, this was meant to be a 7.7mil HKD investment as part of the JV's startup capital and so it is interesting that there is going to be a significant impact to FY26 profitability.

But company actually procured GPUs (IIRC, are PRC-made) on its own BS to lease to the JV and also made additional shareholder loans on top of the original capital injection. On hindsight, did it threw more money after bad money (sunken cost fallacy)?

Anyways, it is laughable when Mgt says they are "non-cash impairment provisions". Maybe they are using accountant language because in the business language, cash has definitely been impaired!

PROFIT GUIDANCE ON UNAUDITED FINANCIAL RESULTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2026

The expected decline in profitability for FY2026 is due primarily to non-cash impairment provisions expected to be recognised in relation to the Group’s investment in, and GPUs and related ancillary hardware assets under equipment leasing arrangements to Trio AI Limited, an associate of the Group in which the Group has an equity interest of 26.6%. They relate in particular to: 

(a) the carrying amount of the Group’s investment cost in Trio AI, advances made to Trio AI, and receivables owing from Trio AI;
(b) GPUs and related ancillary hardware deployed under the equipment leasing arrangements to Trio AI for its operations; and 
© GPUs and related ancillary hardware assets remaining undeployed which are held by the Group.

Specifically, as announced on 16 September 2025, a new joint venture partner was admitted into Trio AI to strengthen Trio AI’s capital base and support its next phase of commercialisation. However, based on the latest information available to the Board, Trio AI has not achieved sufficient commercial traction despite the admission of the new joint venture partner, and the additional working capital has not resulted in improvement in its business performance. In addition, certain rental amounts owing from Trio AI to the Group under the equipment leasing arrangements have remained outstanding beyond their contractual due dates.

https://links.sgx.com/FileOpen/VHL-Profi...eID=888547

[hongonn]

I am alright with the initial investment of hkd 7.7m which is nothing much. What bother me is the MetaX gpu that they are buying. The first batch is hkd 60m and second batch is hkd 172m. Not sure how much has been committed to the second batch. A rough calculation is like sgd 37.7k per gpu. These are no Nvidia chips yet so expensive.

I really have no idea the gpu residue value and the impact to results.

[weijian]

I am alright with the initial investment of hkd 7.7m which is nothing much. What bother me is the MetaX gpu that they are buying. The first batch is hkd 60m and second batch is hkd 172m. Not sure how much has been committed to the second batch. A rough calculation is like sgd 37.7k per gpu. These are no Nvidia chips yet so expensive.

I really have no idea the gpu residue value and the impact to results.

Hi hongonn,

Thanks for providing the numbers. Valuetronics' total equity is ~1.5bil HKD and the 2 batches add up to ~15% of total equity. That's not a small sum to commit. Interestingly, Mr Market also bid down the company by something similar after the profit warning.

On another note, I ain't no AI infrastructure expert here but I do understand the difference between a GPU and a GPU system. A GPU is a standalone packaged chip which acts as some sort of "brain" and has to be plugged into a system before it can work. A GPU system is a rack that is integrated with GPU (often more than one), HBM (high bandwidth memory), networking switches and a cooling system. So, it is obvious a GPU system is more expensive than a GPU. For example, Nvidia sells GPU systems rather than GPUs for AI training/compute purposes. Nvidia will get the non-GPU components from other suppliers (HBM-South Koreans, networking-Oracle etc, cooling systems-The Taiwanese subcontractors)

[hongonn]

Hi weijian thanks for the info.

While valuetronics having hard time getting annyone onboard on its AI cloud, Alibaba just announced another spectacular cloud service result of 38% rise mostly on AI demands.

Why the contrast? I can’t help thinking probably alibaba result was boosted by the a few AI players like Deepseek etc. The so called circular trades that concentrated on a few customers that I help you you help me. Like OpenAI paid oracle oracle paid nvidia nvidia invest OpenAI etc etc.

Does the general public mom and pop companies need that much of AI computing power? Well seem like valuetronic can’t get any of those to subscribe.

Anyway these are just my interpretation maybe far away from reality.

[weijian]

The results are out. Company recognized a net "non cash" 48.4mil HKD impairment (under note7 of financials). From accounting perspective --> (a) The equity carrying value and loan to Trio AI has been fully impaired, (b) GPUs for Trio AI are only partially impaired. The actual residual value is only available from the annual report but it should be >100mil HKD.

Also interesting to see a big value unlock from the decision makers with the dividend upsized and a 300mil SBB announced. Valuetronics isn't a stranger to SBB as it had first announced a 250mil SBB program in Feb2022. However, that SBB looked like a half hearted attempt as buyback activity was mainly front loaded in the 1-2years and as end March2026, < half of the quantum was completed. This time around, there is a clear timeline of 2 years for the 300mil SBB.

The decision makers only own ~25% of the company and with this Trio AI write-off saga, I suppose they are wise enough to upsize the dividend to appease the remaining 75%.

When I last looked at the company 3 years ago, BS was ~75% cash and the latest BS shows it is still largely cash based with ~80% of equity (no debt) made up of cash. In general, contract manufacturers have large working capital with relatively long cash conversion cycles but Valuetronics seem to be an outlier with low working capital (relative to equity).

Valuetronics’ FY2026 dividend payout exceeds 100% of net profit; Raises dividends policy and announces programme to return surplus cash to shareholders

 Proposes final dividend of 14.0 Hong Kong cents per share and special dividend of 16.0 Hong Kong cents per share1
; together with the interim and special interim dividend of total 8.0 Hong Kong cents per share, this brings total dividend for FY2026 to 38.0 Hong Kong cents per share, up 41% from previous year
 Revises dividend policy2 to 50% to 70% of net profit per year with effect from 28 May 2026.
 To enhance shareholder returns, surplus cash of approximately HK$300.0 million3 will be returned to shareholders between FY2027 and FY2028:
In FY2027, approximately HK$146.0 million is allocated, including HK$66.0 million in special
dividends and not less than HK$80.0 million in share buybacks.

FY26 PR: https://links.sgx.com/FileOpen/20260528-...eID=890521
FY26 ppt: https://links.sgx.com/FileOpen/20260528-...eID=890522
FY26 financials: https://links.sgx.com/FileOpen/20260528-...eID=890520

[BlueKelah]

I sold out this one too after suddenly price spike(in such a short time) seems like someone wanna pump it.