KUALA LUMPUR (March 29): Shares of VS Industry fell close to 5% during the morning trading session on Friday, after the electronic manufacturing services firm’s latest quarterly results disappointed investors and raised caution among analysts over its prospects.
VS Industry declined as much as four sen to RM0.795, nearly erasing gains over six days. The stock was off intraday lows and traded unchanged at RM0.835 at 11am, after more than 15 million shares changed hands. In contrast, the country’s benchmark index FBM KLCI was 0.6% higher.
Analysts slashed their estimates as six-month net profit only accounted for less than one-third of consensus forecast and at least two now told their clients to dump the stock, underscoring the caution amid the global technology downcycle.
“Moving forward, we reckon that margins would still be challenged especially from the increased labour costs and utilities, coupled with the underutilisation of facility from cooling demand for consumer electronic products,” said Hong Leong Investment Bank, which downgraded the stock to a “sell” rating.
Shares of VS Industry have slipped about 1% so far this year, following a 40% decline over the past two years, as the company grappled with weak earnings amid downturn in demand from end-consumers that led to lower orders from its key clients.
Out of 12 analysts covering the stock, three now rated the stock “sell”, while five have VS on “hold” and only four recommended “buy” calls, according to Bloomberg. The 12-month target price ranged from 71 sen to RM1.06.
Public Investment Bank, which cut its net profit projection by 32% for the 12 months ending July 2024, noted that consumer preference appears to be skewed towards staples amid relatively tighter monetary conditions.
Even as operating conditions appear to have improved in the recent month and the worst may be behind the company, “while the longer-term investment merits of the company remain attractive, we maintain our ‘neutral’ call, given limited rerating catalysts over the near- to medium term,” the house said.
On its part, VS Industry said it is seeing encouraging signs, as orders from its key customers are gradually rising again, underpinned by normalisation of inventory levels and improving sentiments.
“In addition, the launching of new models by certain customers serves to sustain market interest as well,” it said. VS Industry said there are also ongoing discussions with prospective customers that are charting good progress, as it looks to broaden its clientele by the end of the calendar year.
Net profit for the latest quarter fell 47.3% to RM16 million from the same quarter in the preceding year, bringing its first half net profit to RM64.99 million, down 29% when compared to the same period a year earlier.