Thursday, March 29, 2018

VS: Earnings Stayed Strong

Result Update

For QE31/1/2018, VS's profit before tax rose 26% q-o-q or 13% y-o-y to RM69 million while revenue rose 3% q-o-q or 46%  y-o-y to RM1.113 billion.

Table 1: VS's last 8 quarterly results

The Group recorded higher revenue y-o-y from its Malaysia & Indonesia segments which more than offset the decline in the China segment. Revenue for Malaysia segment rose due to higher orders from key customers while Indonesia segment benefited from a change in an existing customer's purchasing arrangement (from consignment to turnkey manufacturing). The China segment's revenue dropped due to change in sales mix and contribution from new customers.

Meanwhile, profit before tax increased to RM68.5 million from RM60.6 million in the previous quarter. The higher-than-proportionate improvement in profit before tax was mainly due to profit contribution from China as a result of better sales mix. Despite Malaysia segment's profit before tax was comparable to previous quarter due

Table 2: VS's quarterly results contribution by geographical segments

From the graph below, we can see that VS's earning growth lagged behind its revenue growth, due to lower profit margin. If profit margin suffered in the past few quarters when USD-MYR exchange rate was favorable, how will VS perform when USD-MYR exchange rate turned unfavorable?

Graph: VS's last 52 quarterly results


VS (closed at RM2.52 yesterday) is trading at a trailing PE of 17.5 times (based on last 4 quarters' EPS of 14.38 sen). At this PER, VS is deemed fairly valued.

Technical Outlook

VS had a strong rally after it broke above the horizontal line at 14 sen in 2014. However the monthly MACD is poised to do a negative crossover, which could lead to a period of price consolidation between the 20 & 30-month EMA lines at RM2.40-2.50.

Chart: VS's monthly chart as at Mar 28, 2018 (Source:


Based on satisfactory financial performance, reasonable valuation & still-positive technical outlook, VS is still a good stock for long-term investment.


I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.

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