VSI posts weaker 2QFY19 results

KUALA LUMPUR: VSI Industry (VSI) has reported weaker second quarter financial year 2019 (2QFY19) with its core earnings coming in at RM38 million which is a 14 per cent decrease year-on-year (y-oy) and 16 per cent decrease quarter-on-quarter (q-o-q).

The lower earnings were due to a lower revenue of RM983 million which fell 12 per cent y-o-y and 9 per cent q-o-q due to lower contributions from the group’s China operations.

Nonetheless, the lower core earnings were still within expectations as it brought 1HFY19 core earnings to RM78 million, which met 65 per cent of consensus full-year expectations.

Despite meeting more than 50 per cent of consensus fullyear expectations, research house Alliance DBS Research said in a flash note that they still deemed the results to be within expectations as they are anticipating a weaker 2HFY19.

As such, they maintained their FY19-21 earnings forecasts with a hold call on the stock and an unchanged 12-month price target of RM1.05 per share.

“Key risks to our recommendation include the inability to execute the contracts secured and the loss of a major customer,” added the research house.

Looking at the group’s Malaysian operation, it had recorded a revenue and a PBT of RM822 and RM52 million which both saw a slight y-o-y improvement but a moderate q-o-q drop.

“The stronger earnings on a y-o-y basis were mainly due to production ramp-up that was driven by higher sales orders.”

Despite this improvement, AllianceDBS Research noted that sales orders from the group’s key customers have declined from Jan 2019 onwards and will be contributing to a weaker 2HFY19.