Slower outlook ahead for VS Industry
KUALA LUMPUR: Analysts at AmInvestment Bank Bhd (AmInvestment Bank) trimmed its financial year 20176 forecasts (FY17F) net profit forecast for VS Industry Bhd (VS Industry) by seven per cent following an analyst briefing on Monday.
“We expect earnings in 4QFY17F to be weaker than expected for two reasons -- management guided that there were delays in the execution of its third and fourth production lines.
“The production was initially set to commence in May. However, due to delays in the moulds’ delivery, the lines are now expected to come onstream in mid-July,” explained AmInvestment Bank yesterday.
“As such, meaningful earnings contribution from the additional capacity should only kick in the next financial year.”
Also, Bank Negara has ruled that all domestic trade among residents shall only be made in ringgit.
VS Industry’s management said that the effect was felt since May 2017, from which time settlements of its battery packs and printed circuit board assembly (PCBA) were made in ringgit, while purchase of raw materials remained in US dollar.
“As the USD weakened over the past few months, we expect gross margins from such goods/services to contract in the fourth quarter of FY17F,” it added.
Moving forward, management said the pricing of VS Industry’s battery packs and PCBA services will take the US dollar’s impact into account.
Therefore, AmInvestment Bank believed the negative impact from the ruling is transitory.
On another note, Ozner Water International Holding (Ozner), a company involved in the water purification and air sanitization businesses in China, has entered into a share purchase agreement (SPA) to acquire 51 per cent equity interest in NEP Holdings (NEP) for RM297 million, valuing the company at RM582 million.
To recap, VS Industry bought a 20 per cent stake in NEP for RM60 million in November last year, which valued the company at RM300 million.
After Ozner’s purchase, VS Industry’s 20 per cent in NEP is now worth RM116 million, near double of its purchase price within a year.
“Originally, VS Industry could expect two income sources from NEP from FY18F-FY19F: RM8 million per year associate income with a profit guarantee; and manufacturing jobs given to the company’s 44 per centowned VS International Group that could potentially bring about RM126million per year in revenue.