SINGAPORE (March 24): With solid cash flows and little debt, tech and electronic component manufacturers have long been favourites among yield-seeking investors.
According to analysts, the sector averaged a 4.4% yield last year. But many of these stocks have appreciated significantly over the past year on the back of steady orders. Their financials have also been bolstered by a stronger US dollar, the tech sector’s primary currency of exchange. Larger players are leading the gains.
Venture Corp is up 14%, shares in Valuetronics Holdings have soared 50%, and Hi-P International is up 30%. So, it may be time for investors to consider some of the smaller, lesser-known players.
One stock that may offer some upside is CEI Limited.
Assuming a payout ratio of 80%, CIMB analyst William Tng forecasts that CEI’s dividend yield will be 9.5% for FY2017 and 10.3% for FY2018. He maintains his “add” call on the stock, with a price target of S$1.11.
The company is a contract manufacturer that assembles printed circuit boards. It also designs and manufactures industrial equipment used in a range of sectors.
CEI focuses on what it calls “high mix, low volume” contract manufacturing services. These include electroluminescent displays for the transport and healthcare industries, semiconductor equipment, and liquid and gas chromatographs and measuring instruments.
Most of its sales come from customers in Asia-Pacific.
For more information on why investors should consider looking to CEI for yield, find out more in this week’s issue of The Edge Singapore (Issue 772, week of March 27), available at newsstands today.