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Valuetronics Q3 profit up 2.6% to HK$59.7m on lower income tax expense

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Valuetronics shares closed at $0.75 apiece on Monday (Feb 11), up 2.7 per cent, or two cents.

A DROP in income tax expense lifted Valuetronics Holdings' third-quarter net profit, despite a 7.5 per cent decline in revenue.

For the three months ended Dec 31, net profit for the electronics manufacturing services company rose 2.6 per cent to HK$59.7 million (S$10.4 million), as income tax expense fell 24.2 per cent to HKS$6.7 million. 

However, for the nine-month period, net profit actually slipped 2.6 per cent to HK$153.7 million. This translated to an earnings per share of 35.6 HK cents on a fully diluted basis, down from 36.8 HK cents a year ago.

For the nine-month period, the group made a provision of HK$13.6 million as its Danshui Factory was affected by flash flooding in late September 2018. Valuetronics has also made an insurance claim for the damages suffered, and made the provision after taking into account insurance deductibles and non-recoverable costs. 

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No dividend has been declared. 

Meanwhile, revenue for the quarter fell 7.5 per cent to HK$729.6 million. This comes as a 12.2 per cent increase from its industrial and commercial electronics business to HK$434.4 million - mainly attributable to its printer and automotive customers - was more than offset by a 26.4 per cent decrease from its consumer electronics segment to HK$295.2 million. In particular, weaker performance from its smart lighting products is expected to continue in the near term, the company said.

"As a manufacturer with global sales, the group is operating in an uncertain macroeconomic environment, caused by geopolitical and trade tensions. Whilst there is no material immediate direct economic impact on us at this juncture, we cannot rule out any indirect and consequential impact on us, such as margin pressures, or even the potential loss of customers as they switch to alternative suppliers, if the trade tensions do not ease," Valuetronics said. 

"The continued trade tensions have driven our customers to adopt a more diversified procurement strategy as they evaluate options of assembling products outside China, to mitigate the impact of tariffs on goods imported to the US market."

In response to this uncertainty, Valuetronics is exploring diversification into North America and South-east Asia. Nonetheless, barring unforeseen circumstances, the group expects to remain profitable for the financial year ending March 31, 2019.

As at 2.01pm on Tuesday, Valuetronics shares were trading at S$0.73 apiece, down 2.7 per cent, or two Singapore cents.