DESPITE efforts in ramping up its workforce with hiring of local workers to tackle its labour shortage woes, such situation is expected to persist in VS Industry Bhd for the remainder of the current financial year.
If its recruitment process goes as planned with the 3,700 foreign labour quota allocated, the Johor-based electronic manufacturing service (EMS) provider would be able to ramp up its operations by 40%, according to Hong Leong Investment Bank (HLIB) Research.
“We gather that the recruitment expenses could sum up to circa RM30 mil which is expected to be fully incurred in FY7/2022 and subsequently claimed from customers,” analyst Syifaa’ Mahsuri Ismail pointed out in a company update.
“Note that its i-Park Senai Airport City facility has started production since August 2021. Currently running at suboptimal capacity of 20%, the utilisation rate is only expected to be ramped up once the required labour comes in.”
According to HLIB Research, revenue guidance of the facility looks healthy at RM300 mil for F7/Y22 and RM800 mil for FY7/2023. “We reckon that this could be one of the biggest revenue contributors once the production starts to ramp-up fully,” projected the research house.
All-in-all, HLIB Research reiterated its “buy” rating on VS Industry but slashed its target price to RM1.21 (from RM1.45 preciously) based on 18 times price-to-earnings ratio (PE) pegged to CY2022 earnings per share (EPS).
“As the biggest EMS player in Malaysia with solid track record, we opine that VS Industry is a prime beneficiary from the intensifying trade diversion theme,” added the research house.
Meanwhile, UOB Kay Hian Research expects VS Industry to see sequentially stronger results for 2H FY7/2022 although the on-going systemic issues could still lead to operational inefficiency.
“(We) cut (the company’s) FY7/2022 earnings by 10%. Beyond the temporary blips, key customers remain committed by making VS their preferred partner in Asia via massive volumes loadings,” opined analyst Desmond Chong.
“The additional job opportunities upon the full arrival of foreign workers could lift its earnings by 23% in a blue-sky scenario which we have yet to factor in. Maintain ‘buy’ with an unchanged target price of RM1.60.”
At 11.31am, VS Industry was up 2 sen or 2.02% to RM1.01 with 3.06 million shares traded, thus valuing the company at RM3.87 bil. – March 31, 2022
