AmResearch still upbeat on VS Industry

PETALING JAYA: AmResearch is still upbeat on VS Industry Bhd (VSI) despite losses from its operations in China. It is maintaining a “buy” call on the company with unchanged fair value of RM1.50.

This is premised on the resilience of its domestic sales due to its association with Bissell and its key customer with new product launches slated over the next few years; its ability to offer turnkey electronics manufacturing services (EMS) solutions by being a vertically-integrated player; and its increasingly diversified customer base with potential opportunities to be secured from the US-China trade war.

However, it has trimmed VSI’s FY20 forecasts by 3% but raised FY21 and FY22 forecasts by 1% and 5% respectively due to lower-than-previously guided order forecasts for Bissell in FY20 but with higher gross profit margin assumptions overall.

VSI’s Indonesia segment to remain profitable in FY20 but its China segment is still expected to contribute losses.

“VSI aims to increase sales and improve utilisation rates for its Indonesia segment and continue to minimise losses for its China segment as the operating environment is still expected to stay challenging,” AmResearch said in a report.

Meanwhile, the group’s two Bissell models are slated to start production in January and March of this year.

“Production utilisation rate for the first Bissell model which started in September 2019 is seeing a gradual ramp-up. The group has a total of five Bissell models confirmed, while its current 160,000 sqft plant allocated for the customer is able to accommodate the production of nine models.”

Recall that last March, VS Industry inked a three-year master supply agreement with Bissell, a home appliance company in the US, to manufacture its home care products on a box-build assembly basis.

AmResearch also noted that VSI has seen positive progress from its new printed circuit board assembly customer, which contributes RM200 million per annum.

The group is in negotiations with four to five prospective customers, but the research house not has factored in any forecasts for potential customers.

source https://www.thesundaily.my/business/amresearch-still-upbeat-on-vs-industry-YE1886706