Revenue for 1Q10 decreased 7.0% to HK$218.6 million, mainly due to lower sales from some major customers in the OEM segment but offset by increased in ODM segment on the back of increased sales from one of the major customers in the consumer electronics segment.

The Group's gross profit decreased 20.4% to HK$36.0 million in 1Q10 with gross profit margins edged down by 2.7ppt to 16.5% due to a change in sales mix and a depreciation charge and operating costs of the new Daya Bay facilities.

The Group made a provision for doubtful debt of HK$9.5 million, which came on top of a HK$8.7 million provision in FY09, for a customer who has experienced working capital distress. As of 1Q10, full provision has been made for this customer.

Cash decreased by HK$43.8 million, mainly due to the deposits and payments for the construction of staff dormitory, increase in inventories and increase in trade receivables. The Group's trade receivables increased by HK$63.6 million to HK$166.1 million as at 30 June 2009, resulting from increased purchase orders from customers in line with the increased sales and also partially due to longer payment terms for one of the Group's major MNC customers.

We continue to value Valuetronics at 6x PER FY10F (previous 5x PER FY10F), deriving our target price of S$0.18. With an upside potential of 44%, we maintain our BUY recommendation.