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KUALA LUMPUR: VS Industry Bhd
The current valuation looks cheap given its strong earnings growth catalysts, says Maybank Investment Bank Research.
The research house, which has a “buy” call at the counter, said it expects higher orders from existing VS Industry customers and its new customer.
“We also understand that VSI is in discussions with a potential customer and this could lead to the establishment of a new factory,” he said.
“We raised our FY 21-22E earnings by 8-10% and pushed our TP in 20sen to MYR2.45, pegged to an unchanged PER of 19x CY21E at + 1SD,” he said.
The research house raised its price target to RM2.45 from RM2.25 previously, which is a 15% increase from Monday’s last traded price of RM2.16.
For fiscal 2020, VS Industry core net income of RM130.4k exceeded expectations by 152% and 140% from Maybank IB and consensus estimates.
The most recent quarterly basic earnings were RM 69.9 million, which exceeded estimates as Maybank IB had assumed more bearish fourth quarter earnings growth.
Fundamental 4QFY20 bottom line growth was primarily impacted by lower order from the company’s key customer in the UK and pre-tax losses in its Indonesia and China segments due to under-utilization of production capacities.
However, the gains were partly cushioned by higher sales volume from its coffee client and lower opex in China after major restructuring exercises in fiscal 2019.
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