Karin’s FY13 net profit declined 7.5% yoy to HK$55.7m even as revenues increased 18.4% yoy to HK$3.8b. The increase in revenue was mainly from higher demand for network security, enterprise software products and consumer electronics products. However, the higher SG&A expenses which increased 34% yoy dragged down net profits. It declared a final dividend of HK$9.3 cents.
Key takeways from results:
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FY13 revenues increased 18.4% yoy to HK$3.8b led by gains of +31.3% yoy in its Components Distribution segment and +18.6% yoy in its Consumer Electronics Products (CEP) segment.
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FY13 gross profit margins was stable at 5.9%, same as last year’s.
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Selling and distribution costs increased 34% yoy due to increase in rental and rates of retail shops of the consumer electronics products segment, increase in number of retail stores and increase in staff costs and commissions paid to sales staff.
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As a result of higher SG&A expenses, FY13 net profit margins dropped 0.4% pts yoy to 1.46%.
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The group declared a final dividend of HK$9.3 cents/share, bringing the full year dividend to HK16.5 cents/share. This translates to a dividend yield of around 7.5% based on current share price of S$35.5 cents.
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The group sees a continuing challenging landscape due to over capacity and overproduction in the PRC and slow-down in corporate spending.
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The group however has various initiatives to expand its existing product lines. These include investments into Radio-Frequency (RF) application IC and Energy Saving Solutions targeting infrastructures in the PRC.
Our view:
Although the group continues to see pressure on its gross and net profit margins, it has introduced various initiatives such as more stringent credit controls and inventory management, as well as plans to offer services with higher margins. The group is currently trading at historical 8.4x PER, which is above its 5-year historical PER average of 6.7x. However we like that the group continues to pay a consistent dividend since its IPO (see chart below) and we believe that its share price should be supported by its current dividend yield of 7-8%. The group generated a positive total free cash flow of HK$147m over the last 10 years.
Source: Company, NRA Capital