SINGAPORE (March 21): Shares in Fu Yu Corp rose by almost 3% to 19.6 cents on Monday, after The Edge Singapore reported that the company plans to clinch new customers and enlarge its product range, which could result in more stable earnings and a broader investor following.

Fu Yu, one of the largest makers of precision injection moulds and plastic parts in Asia, has a net cash position that is more than two-thirds of its market cap.

In an interview with The Edge Singapore, Fu Yu’s CEO, Elson Hew, says the firm is planning to make components for new products, such as medical equipment, solar panels, metal detectors, water filters and air purifiers. “For medical equipment, although the volume is low, the value is high. Hence, margins are better,” he says.

Fu Yu reckons that these new products could help diversify its revenue base and become its future growth drivers.

An enlargement in the range of products could also enhance the performance of its plants in China. Though China accounted for around 61.4% of the firm’s revenue last year, the plants are only operating at an utilisation rate of 50 to 55%, according to Hew.

Shares in Fu Yu have risen 21.25% this year. Despite their strong rally, the shares appear relatively cheap and are currently trading at 10.5 times forward earnings. They also offer a good dividend yield of 5.13%.

Fu Yu is RHB Research Institute’s top pick across the manufacturing space in Singapore. It has a ‘buy” recommendation on the stock with a price target of 29 cents. For FY2016, the broker is projecting a 2.5% growth in the firm’s recurring net profit to $17.1 million. It is expecting an 8.4% increase to $18.5 million for FY2017. In addition, RHB expects more margin enhancement as a result of further rightsizing exercises.