VS' net profit dropped sharply

VS has just announced its results for 3Q2008 ending 30/4/2008, where its net profit dropped by 53.9% q-o-q or 44.8% y-o-y to RM9.8 million. Its turnover had similarly dropped by 39.5% q-o-q or 30.4% y-o-y to RM201 million. The company attributed the poor performance to lower sale volume to key customers during the quarter.



VS' main customer is Dyson- a producer of vacuum cleaners- has outsourced the manufacturing of its products to VS & a Singapore-based company, Meiban Group Ltd. It is likely that VS' reduced turnover was due to a sharp contraction of its sale to Dyson. This highlights the risk whenever a company is too dependent on one or a few customers for the bulk of its turnover.

From the chart, we can see that VS share price is slowly breaking below its immediate accelerated uptrend line support at RM2.25-30. The next support would be the psychological RM2.00 level & thereafter its long-term uptrend line support at RM1.70-80.


Chart: VS' weekly chart as at June 26th (source: Quickcharts)

Since the immediate uptrend line has been violated & the latest quarterly results was very disappointing, it is safer to wait for the next quarterly results before making any decision on this stock.