VS: A good quarter!

Result Update

For QE31/10/2014, VS's net profit dropped by 3.4% q-o-q but rose 268% y-o-y to RM35 million while revenue rose marginally by 1.9% q-o-q or 25% y-o-y to RM545 million. Pre-tax profit increased q-o-q mainly attributable to higher sales generated by the Malaysian operations compared to the preceding quarter coupled with improved gross profit margin resulting from improved sales mix for the Malaysian operations. Profit after tax dropped q-o-q as VS did not enjoy a tax credit, unlike the immediate preceding quarter. For QE31/10/2014, it recognized a lower tax incentive in relation to the export incentive of RM4.04 million as compared to an oversized export incentive of RM20.38 million in QE31/7//2014.


Table 2: VS's last 8 quarterly results


Chart 1: VS's last 39 quarterly results

Valuation

VS (closed at RM2.41 last Friday) is trading at a trailing PE of 6 times (based on last 4 quarters' EPS of 42 sen). If we exclude the exceptional large tax credit for QE31/7/2014, the 4 quarters' EPS  would be reduced to 32 sen and the trailing PE would rise to 8 times. Based on the revised PE, VS is still trading at undemanding PE multiple.

Technical Outlook

VS was a strong uptrend since June this year. It rose from RM1.60 to a high of RM2.70 in October before dropping to an intra-day low of RM2.08 on December 15. Since the release of its good results, the stock had rebounded to about RM2.40. We can see that VS's immediate resistance and support are RM2.70 & RM2.20, respectively.


Chart 3: VS's monthly chart as at Dec 19, 2014 (Source: ShareInvestor.com)

Conclusion

Based good financial performance and fairly attractive valuation, VS is still a good stock for medium-term investment. To go higher, the share price needs to break above the immediate resistance of RM2.70.

Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, VS.