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Taking A Look At Grand Venture Technology

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Grand Venture Technology (GVT), a precision engineering company specialising in offering manufacturing solutions for machining, sheet metal components, and assembly of modules, became the first public-listed company on the Catalist Board of the Singapore Exchange (SGX) in 2019.

Since its late-January debut, the stock price of GVT has declined from $0.27 to $0.23, posting a market capitalisation of $53.9 million as of 17 May 2019. Accordingly, the company has a relatively low trading volume with average three-month daily volume of 500,000 shares. Its adjusted six-month volume weighted average price (VWAP) is approximately $0.26165.

Financials For Grand Venture Technology

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Source: SGX StockFacts and Company’s Financials

Based on GVT’s latest reported earnings for FY18 ending 31 December 2018, revenue rose 32.9 percent year-on-year to $41 million compared to $30.9 million a year ago. However, revenue growth has also slowed considerably, from 95.4 percent in FY17 to 32.9 percent in FY18.

Management noted in its FY18 Annual Report that the 32 percent growth in revenue was attributable to higher contributions from its Semiconductor segment and Analytical Life Sciences, Electronics and Other segments. During FY18, both segments enjoyed an increase in orders from existing customers, as well as new customers.

Operating Income (OI) margin has also improved to approximately 16.7 percent in FY18 compared to 12.6 percent in FY17. However, net income margin, excluding extraordinary items fell slightly from 12.4 percent in FY17 to 11.4 percent in FY18. Nevertheless, both OI and net income margin were generally in uptrend.

Cash And Debt Positions

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Source: SGX StockFacts And Company’s Financials

Over the years, GVT built up its cash position from $0.5 million in FY15 to $2.5 million in FY18.

Meanwhile, both total debt to-total assets, and total debt-to-total equity have generally showed declining trends. Moreover, the interest coverage ratio as measured by the operating income to total interest expense has risen from 4.2 times in FY17 to 7.3 times in FY18.

GVT’s overall cash flows from operating activities (CFO) have also risen from $2.9 million in FY17 to $6.2 million in FY18,

Peer Comparisons

Grand Venture Technology Limited (GVT) Frencken Limited UMS Holdings Limited ISDN Holdings Limited
Price-To-Book Value (P/BV) 2.669 0.963 1.455 0.604
Price-To-Sales (P/S) N/A 0.410 2.600 0.307
Dividend Yield (%) N/A 3.424% 6.452% 3.182%
Dividend Yield (%) – Five-Year Average) N/A 4.206% 7.423% 2.210%
Enterprise Value (S$’millions) 75.780 266.310 338.780 79.460
Price-To-Cash Flows (P/CF) N/A 5.437 6.882 4.950
Historical 12-month Price-Earnings Multipe (P/E) N/A 8.299 7.722 7.931
Net Debt (S$’millions) 21.910 14.910 6.190 (13.310)

Source: SGX StockFacts

Amongst its local-listed peers, ISDN Corporation price-to-book (P/BV) multiple is the lowest at 0.60 times book value.

In terms of dividend yield, UMS Holdings has so far one of the highest dividend yields compared to the rest.

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Source: Shares Investment

Similarly, if we were to reference GVT price-earnings (P/E) and P/BV multiples to the sector, we find that it is trading at a premium.

Risk Considerations

Both GVT’s cash position and CFO have improved significantly. Meanwhile, debt ratios have also declined quite substantially. However, it is not to say that the coast is clear.

Some of the reasons for caution include a potential rise in competition in the precision engineering industry. As we can see, there are a few listed peers that pose stiff competition against GVT, including the likes for Frencken, UMS, and ISDN Holdings. In addition, there are also plenty of unlisted and foreign players in the field.

Moreover, the current US-China trade tensions are still ongoing and the management has not come out to update anything about how it would be affected given the potential fallout between the two economic powers. A potential disruption in the global supply chain could also impact the industry and GVT is unlikely to be completely immune from it.

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