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Thursday, March 29, 2018

Maybank Research expects stronger quarters for VS Industry

Thursday, 29 Mar 20189:04 AM MYT

Maybank Research expects VSI to gain operational efficiency especially for the Malaysian operations in the coming quarters.

KUALA LUMPUR: Maybank Investment Bank Research expects stronger quarters ahead for VS Industry, which is one of the top 50 electronics manufacturing services providers in the world engaged in the manufacturing and assembly of consumer electronic products.

It said on Thursday it expects VSI to gain operational efficiency especially for the Malaysian operations in the coming quarters as volume shipment for Customer X climbs in order to fulfil demand for its newly launched flagship home cleaning products.

“On the assumption that all six box-build lines will achieve optimum utilisation, we expect VSI’s full earnings potential to be showcased in 2HFY18; we expect VSI to report stronger average quarterly net profits of RM54mil to RM60mil in the upcoming two quarters,” it said.

Maybank Research said that for a growth stock with a three-year expected earnings compounded annual growth rate (CAGR) of 22%, valuations are inexpensive at 13.9 times CY19 price-to-earnings ratio (PER) currently.

As VSI continues to gain traction with its existing clients, its newfound economies of scale could also open up opportunity for job wins from new clientele.

On the 1HFY7/18 earnings, the research house said they were within its expectation at 46% of our full-year forecast.

Despite a slight quarter-on-quarter weakness in 2QFY18, it believes that earnings would catch up in 2HFY18 as utilisation for VSI’s new box-build production lines gain traction with a key product launch recently by VSI’s largest client.

“We make no changes to our forecasts. VSI’s fundamentals are intact with visible growth over the next three years. Our RM3.18 target price is pegged to an unchanged 17.5 times CY19 EPS (in line with peers),” it said.


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