VS Industry’s started its fiscal year on a solid footing, as
1QFY16 core earnings came in at MYR45.7m, ie 28% of our and consensus’
full-year estimates. Maintain BUY with an unchanged MYR1.81 TP
(15% upside). We remain positive about the company’s earnings drivers,
which wouldbe underpinned by orders from new and existing customers. An
interim dividend of 1.5 sen was declared.
Within expectations. We deem VS Industry’s 1QFY16
(Jul) results to be in line since it is usually a seasonally stronger
quarter leading up to the holiday season. Revenue rose 12.5% YoY on the
back of higher brewer and printed-circuit-board (PCB) sales volume,
which grew an estimated 10% and 50% QoQ respectively. We gathered that
ASPs for the brewers and PCBs remained stable during the quarter under
review.The stronger PCB sales volume was well within expectations, as
one of the company’s key customers ramps up production of a popular
cordless vacuum cleaner model. An interim dividend of 1.5 sen was
declared.Outlook and forecast. We remain positive on VS Industry’s earnings drivers, which would stem from orders from new customers and growing orders from existing ones. This would be backed by available spare capacity at its existing plants, which we estimate to be 30-40%. We understand that the company is currently in talks with a new customer for a contract that could add MYR4m-6m to its bottomline in FY16 should it come to fruition. The prototype coffee machine that VS Industry was previously developing for one of its key customer has also been approved by said client and is slated for production in 4QFY16.
Maintain BUY with an unchanged TP of MYR1.81. As results came within our expectations, we make no changes to our recommendation, earnings forecast and SOP-derived MYR1.81 TP. Our corroborative DCF valuation is also supportive of our TP. Risk to our earnings include: i) loss of orders from key customers, ii) a rebound of the MYR against the USD, and iii) plant accidents/shutdowns.
Source: RHB Research - 16 Dec 2015
VS (6963) - VS Industry - A Record Quarter
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