Stock Name: VS
Company Name: V.S INDUSTRY BHD
Research House: KENANGA
VS Industry Bhd
(June 30, RM1.80)
Upgrade to buy at RM1.20 with target price of RM1.52: Revenue of RM551 million was 78% of our forecast, while net profit of RM15 million was 69%. Revenue was flat, while net profit jumped 127% mainly due to lower associate losses augmented by improved margins with gross profit rising 15bps to 15.3% (9M09: 13.8%)
Revenue was up 6.4% q-o-q, while net profit was 46% higher on lower associate losses and improved margins, which jumped 23bps to 16.4% (2Q10: 14.1%) at the gross due to rising scale and improved efficiency. Dyson, the group's major customer, has seen improved business conditions, which translated into higher loadings as a result. Based on guidance, we gather that orders from Dyson had seen a 6% sequential improvement.
Revenue was up 13% y-o-y, while net profit jumped 253% mainly due to lower associate losses and improved margins. Recall that in 3Q09, operations were challenged by the credit crisis which saw orders tail off with financing hard to come by even for genuine businesses. Associate's operations under 44%-owned VS Industry Group Ltd, which has China as its base, was hit particularly hard. Margins also improved, with gross margin reaching 16.4% versus 9.4% previously.
Outlook is on the mend as global economic conditions improve. Visibility remains a healthy six months with Dyson once again seeing improved loadings with models refreshed. While clients ' including Hoselock and Valeo ' remained muted, new products from clients that include those from Japan and Korea, albeit small, should pave the way for more excitement to come once execution is proven. We gather from the management that prospects for Malaysian electronic manufacturing service providers, including VS Industry, should improve as China's loses its competitive edge due to rising costs.
We tweak FY10F net profit higher by 4% as we reduce the associate's losses, mitigated by higher than forecasted taxes. The management is guiding associates to break even for the financial year as business conditions normalise post-crisis. However, FY11F is raised 23.4% to RM34.1 million as we factor in higher loadings on improved economic conditions. We roll over our benchmark to FY11 and based on eight times multiple will yield a new target price of RM1.52 (RM1.08 on eight times CY10F). Upgrade to buy. ' Kenanga Investment Bank Bhd Research, June 30
This article appeared in The Edge Financial Daily, July 1, 2010.
Company Name: V.S INDUSTRY BHD
Research House: KENANGA
VS Industry Bhd
(June 30, RM1.80)
Upgrade to buy at RM1.20 with target price of RM1.52: Revenue of RM551 million was 78% of our forecast, while net profit of RM15 million was 69%. Revenue was flat, while net profit jumped 127% mainly due to lower associate losses augmented by improved margins with gross profit rising 15bps to 15.3% (9M09: 13.8%)
Revenue was up 6.4% q-o-q, while net profit was 46% higher on lower associate losses and improved margins, which jumped 23bps to 16.4% (2Q10: 14.1%) at the gross due to rising scale and improved efficiency. Dyson, the group's major customer, has seen improved business conditions, which translated into higher loadings as a result. Based on guidance, we gather that orders from Dyson had seen a 6% sequential improvement.
Revenue was up 13% y-o-y, while net profit jumped 253% mainly due to lower associate losses and improved margins. Recall that in 3Q09, operations were challenged by the credit crisis which saw orders tail off with financing hard to come by even for genuine businesses. Associate's operations under 44%-owned VS Industry Group Ltd, which has China as its base, was hit particularly hard. Margins also improved, with gross margin reaching 16.4% versus 9.4% previously.
Outlook is on the mend as global economic conditions improve. Visibility remains a healthy six months with Dyson once again seeing improved loadings with models refreshed. While clients ' including Hoselock and Valeo ' remained muted, new products from clients that include those from Japan and Korea, albeit small, should pave the way for more excitement to come once execution is proven. We gather from the management that prospects for Malaysian electronic manufacturing service providers, including VS Industry, should improve as China's loses its competitive edge due to rising costs.
We tweak FY10F net profit higher by 4% as we reduce the associate's losses, mitigated by higher than forecasted taxes. The management is guiding associates to break even for the financial year as business conditions normalise post-crisis. However, FY11F is raised 23.4% to RM34.1 million as we factor in higher loadings on improved economic conditions. We roll over our benchmark to FY11 and based on eight times multiple will yield a new target price of RM1.52 (RM1.08 on eight times CY10F). Upgrade to buy. ' Kenanga Investment Bank Bhd Research, June 30
This article appeared in The Edge Financial Daily, July 1, 2010.
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