Very strong growth ahead for VS Industry

KUCHING: Stock analyst AmInvestment Bank Bhd (AmInvestment Bank) is reiterating their positive stance on VS Industry Bhd ( VSI) as they expected very strong growth ahead for the group.

In a company update by AmInvestment Bank Bhd (AmInvestment Bank), the bank explained that they had just walked away from a meeting with the group’s management feeling highly upbeat due to the company’s impressive prospects in FY18F and FY18F.

“We gather that additional lines were installed in mid- July and are fully operational. And in addition, management guided that more lines are coming on stream in October to November 2017,” the bank shared.

While this would bode well for VSI in the long-term, there have been delays in its execution as the additional lines were previously set to commence in May – leading to a delay of meaningful earnings contribution from these lines to only kick in next financial year.

Besides that, the bank also guides that the group is currently working on procuring new jobs for an American lifestyle product and a Swiss hygiene system for FY19F – translating to significant contribution in future revenue.

While the bank is speculating that the potential contracts could be worth upwards of 30 per cent of VSI’s FY19 forecasted revenue, they have also guided that they will not be factoring any earnings contribution from these until confirmation is given on the contracts’ award.

On another positive note, VSI’s management has also hinted that the acquisition of NEP Holdings ( NEP) by Ozner Water International Holding ( Ozner) may not materialise after all despite the two parties previously entering into a share and purchase agreement (SPA).

To recap, VSI had bought a 20 per cent stake in NEP for RM60 million in November, 2016.

The acquisition was previously estimated by AmInvestment Bank to bring the group circa RM8 million per year in associate income and RM126 million per year in revenue from the potential manufacturing jobs it would give to the group’s 44 per cent owned VSI International Group ( VSI International).

However, the full materialisation of those benefits was previously in jeopardy as Ozner and NEP had entered into an SPA earlier this year for Ozner to acquire a 51 per cent controlling stake in NEP for RM279 million.