Quick take: VS Industry rises 6% despite weak earnings

KUALA LUMPUR: Shares in VS Industry Bhd rose over 6% in a firm market Friday, despite posting results that were below market expectations.

The electronics manufacturing services provider rose 6.21%, or 4.5 sen to 77 sen with 11.5 million shares traded.

VS Industry’s net profit slid 12.5% to RM33.2mil for its second quarter ended Jan 31,2020 from RM37.9mil in the corresponding quarter of the preceding year on lower sales orders from key customers.

Its revenue fell 16.2% to RM820.3mil from RM979mil previously during the quarter.

For the first six months to January 2020, VS Industry saw its net profit rise 4.5% to RM81.3mil from RM77.8mil. Its cumulative revenue, however, fell 9.6% to RM1.85bil from RM2.05bil previously.

AmInvestment Bank Research said VSI’s 2QFY20 core profit was below expectations at RM28mil, bringing 1HFY20 core profit to RM78mil. This is after excluding net one-off gains amounting RM3mil which were mainly from unrealised forex gains.

“Although the 1HFY20 results accounted for 48% of our full-year forecasts and 45% of consensus’ estimates, we consider it to be beneath expectations as we have cut our forecasts for the remainder of FY20,” it said.

The research house has trimmed its FY20F–FY22F forecasts by 18–25% to account for the impact of the Covid-19 pandemic on the group’s operations for 2HFY20, particularly that of its Malaysian operations as production was halted due to the movement control order (MCO).

“We maintain our ‘buy’ recommendation on VS Industry albeit with a lower fair value of RM1.13 per share (previously RM1.50 per share), pegged to an FY21F PE of 14x,” AmInvestment said.

Source: TheStar