Valuetronics is a Hong Kong OEM and ODM EMS manufacturer listed on SGX since 2006.
This morning it announced its first quarter results. You can view the announcement here.
Let me just say that this isn’t your normal dividend plays. An EMS manufacturer plays in a very competitive environment where competition is tough.
There are little product differentiation, and what this means is that you may be seduced that during good times the dividends will look juicy, sometimes upwards of 6-12% yield.
As there are little differentiation, the customers will demand you to cut prices, thus shrinking your margins. If you do not deliver well, the customers will just shift over to another OEM.
You may see your nice dividend yield suddenly become 1%, or in the worse case face operating losses.
A OEM would be better off becoming an ODM, where they propose designs to customers so ......