VS Industry Berhad: SELL
Research
General
- Leading integrated Electronics Manaufacturing Services (EMS) provider
- World's top 50 EMS from 2007 to 2014 (source: Annual Report 2015)
- Director Salary, RM20 million annually (50% of operating expenses)
- Dividend policy minimum 40%
- Outstand shares 1,155 million shares
- Warrants 290.8 million shares (EPS will be diluted 25% once warrants convert to mother share)
Positive
- Major customers, like customer Keurig and Dyson are expected to remain strong, with sale percentage 38% and 25% respectively.
- Customer Keurig to grow CAGR 29% from FY15-18 to 4.6 million units
- Customer Dyson sales for FY16 are expected to grow 50% yoy to RM639 million.
- Dividend policy minimum 40%
- Management is confidence on future growth.
Negative
- Major revenue depends on two (2) customers (63% of total revenue)
- Director's salary too high (50% of operating expenses)
- Minimum wage implementation on July 2016 from RM900 to RM1000 (11% increase), which shall be minimum impact on profit.
- 2QFY (January) and 3QFY (April) performances are typically its weakest quarters due to seasonal demand.
- Earning sensitivity 1.5% to 2.0% reduction for every 1% ringgit fall.
Share price = RM1.20
Earning per Share =RM0.144
Price to Earning ratio = 8.3 (based on current outstanding shares) or 10.4 (diluted shares)
Dividend Yield = 4.8%
My personal view
- Since there next two quarters are traditionally weakest quarters, hence there is no hurry to buy in.
- Next quarter result is expected to be weaker, compare to current quarter.
- Consistence future growth is a question mark. Risk management is too low.
- Profit Margin increase almost 100% from last year, which is unlikely to maintain. If profit margin go back to normal rate, there will be 50% drop on profit, hence as well as share price.
- Management is not taking care shareholder's interest, as taking too high salary and implement ESOS too frequent.
- Price is at high side based on diluted shares. It might be higher due to ESOS on every year.
Target price
Buy below RM0.70 for better safety margin.
http://hongwei85.blogspot.my/2016/03/vs-industry-berhad-sell.html
Koon Bee
Cant imagine how low will it go if Kyy throw his 100 million share in hand...but i suspect Kyy has silently dispose this 100 mil past 3 months at around 50%
2016-03-14 21:51