V.S. Industry Bhd is poised to recover strongly from the various financial repercussions stemming from the current COVID-19 pandemic.
Inter-Pacific Research foresees the Johor-based tech-oriented company to post strong double-digit net profit growth within the next two years after the hiccups in its FY2020 due to movement restriction orders and production lockdowns.
The research house attributed the company’s key growth drivers to (i) stronger order book from new customers; (ii) higher orders from existing key customers; and (iii) greater cost efficiency following improvement on floor utilisation after the mass production of selected products take-off.
“As one of the top electronics manufacturing services players in the region, the group has expanded its production capability to undertake orders from multiple customers concurrently and has the experience in covering the full project life cycle for products from the consumer electronics sector,” observed Inter-Pacific Research.
Today, the group has expanded its geographical footprint beyond Malaysia to China and Indonesia with a combined production floor space of more than 3 million sq ft and a workforce exceeding 8,000 employees who serve key consumer electronics brands from Europe, Japan, and the US.
“The group has demonstrated strong resilience despite movement restrictions and production lockdowns as well as global economic slowdown and uncertain consumer spending amid the global pandemic,” justified the research house.
“We like VS for its (i) strong customer relationships; (ii) proven track record and experience; (iii) solid sales and profit growth trajectory; and (iv) consistent cash generation.”
The key downside risks include (i) the resurgence of coronavirus cases that could imperil economic recovery and consumer purchasing power; and (ii) labour issues.
All-in, Inter-Pacific Research initiated coverage on V.S. Industry with a “buy” rating and a target price of RM2.70.
At 12 noon, V.S. Industry was down 4 sen or 1.69% to RM2.33 with 3.82 million shares traded, thus valuing the company at RM4.41 bil. – Nov 10, 2020
