Monday, December 17, 2018

VS: Earning Mixed

Result Update

For QE31/10/2018, VS's profit before tax rose 81% q-o-q but dropped 8% y-o-y to RM45 million while revenue rose 6% q-o-q but dropped 0.9%  y-o-y to RM1.08 billion. Revenue dropped marginally y-o-y due to lower revenue achieved by the Indonesian operation (as result of the weakening of Indonesian Rupiah) and Chinese operation (due to lower sales orders completed). These had more than offset the 9.4%-increase in revenue for the Malaysian operation which was mainly due to higher sales orders from key customers.

Profit before tax, meanwhile, decreased 8% y-o-y due to LBT incurred by the Indonesian operation and higher LBT incurred by the Chinese operation as a result of lower-than-optimal utilization rate coupled with a loss on disposal of a subsidiary amounting to RM5.4 million. These again more than offset the improved PBT for the Malaysian operation which was in line with higher revenue achieved.

Table 1: VS's last 8 quarterly results

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

Graph: VS's last 54 quarterly results

Comment on Current Year Prospect

VS's comment on its prospect turned decidedly negative in the last quarter. I have appended below the comment for QE31/10/2018 & QE31/7/2018, with the Board's outlook highlighted.

Comment on Prospect in Notes to the FS for QE31/10/2018

Comment on Prospect in Notes to the FS for QE31/7/2018

This change in the outlook was also highlighted in analysts' briefing. A sample of that is given here. This explained the limit-down drop in its share this morning.

Financial Position

As at 31/10/2018, VS's financial position is unchanged, with current ratio at 1.5 times and gearing ratio at 0.9 time. I consider this to be adequate.


VS (closed at RM0.82 at end of morning session) is trading at a trailing PE of 9 times (based on last 4 quarters' EPS of 9.7 sen). At this PER, VS is deemed fairly valued.

Technical Outlook

VS is in a downtrend after it broke its uptrend line at RM1.70. It then broke below the horizontal line at RM1.15 and is now resting at the horizontal line at RM0.80-0.82. If this support is also violated, it may go to RM0.55-0.60. I believe that the current support should hold unless there is something terribly wrong with the company, which we do not know about.

Chart: VS's weekly chart as at Dec 17, 2018_112.30pm (Source:


Notwithstanding the weaker financial performance and negative outlook on its current year prospect, I feel that VS deserves to be rated as a HOLD based on sharply lower share price and reasonable valuation.


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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