VIS (0120) - (Tradeview 2016) Value Pick No. 15 : (Visdynamics Holdings Bhd.)
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Once
again, these writings are just my humble highlights (not
recommendation), feel free to have some intellectual discourse on this.
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Value Pick No. 15: Visdynamics Holdings Bhd (Intial TP RM0.28)
Vis
released their recent QR and the share price moved upwards of 10%. The
revenue growth was amazing with a YoY increase of 222% from RM2.5
million to RM8.07 million (record high) and net profit increase of 3848%
from RM1.97 million. For the immediate preceding quarter, the profit turnaround from loss of 0.06 EPS to 1.78 EPS. NTA increased to 0.19 sens.
If
you look at the revenue growth for the past 3 quarters, you can see the
significant increase in volume and most importantly, it has reached a
level that delivered significant impact to the bottomline of the
company. I am happy with the growth but more importantly, the ability of
the management to translate growth into actual earnings unlike the
earlier quarters.
From
the chart below, Vis earnings has been volatile and inconsistent. Being
in the semicon industry, the company is exposed to the cycles of the
business. Cost in itself is a key metric in determining the margin. This
year thus far, the management appear to have been able to achieve
record margin of 13.7% for the 3 quarters of the years. This is a very
good performance, unlike before.
I
dug deeper into the earlier preceding quarter where there was a huge
jump in revenue yet the company made losses. So it was explained that
the cause would be the unrealised forex loss and higher travelling
expenses and sales and services commission. Both of these instances were
clearly less apparent in the latest quarter as the currency stablised
(slight strengthen) against MYR and the management appear to be able to
control the cost better.
Considering the tough market, it is quite surprising to see the management rather confident with the future prospect. This is another plus point.
Additionally,
in the commentary by the management regarding the prospect of the
company from the immediate preceding quarter, the management managed to
keep up with their assurance on delivering better results due to their
new product model and growth in customer base. This clearly reflected
their ability to deliver.
Previously,
I mentioned that I like the fact the sales revenue improved
significantly. From the report, we can see the revenue were derived from
various geographical locations
outside of Malaysia with strong presence in South East Asia and North
Asia. The exposure to US also have fallen with primary focus on Asia
region. This is beneficial in the long run as the business is considered
to be protected from the slowing local domestic sentiment.
I believe Visdynamics is currently undervalued at 12x trailing PE for a penny counter. Forward looking, assuming the management is able to maintain their profit margin and revenue whilst improving their cost control, the company should be able to deliver a positive EPS. I am not looking for similarly strong performance but rather acheiving just 0.5 sens EPS, bringing it to a full year EPS of 24.4 sens. Applying a multiple of 12x, the fair value would be RM0.29 sens. This is excluding their potential future growth which will lift the PE valuation provided the company can manage their results consistently but I will revisit in the coming quarterly results.
At time of writing, the share price is trading at 22.5 sens, it is my take to collect Visdynamics and hold until the next quarter to get a full year picture.
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VIS (0120) - (Tradeview 2016) Value Pick No. 15 : (Visdynamics Holdings Bhd.)
http://klse.i3investor.com/blogs/tradeview/104947.jsp
Food for thought:
