VS: Earnings Took A Knock

Result Update

For QE31/7/2016, VS's net profit dropped by 43% q-o-q or 79% y-o-y to RM11 million while revenue rose 9% q-o-q & y-o-y to RM554 million. VS's PBT dropped q-o-q from RM22 million to RM9 million due to impairment losses from Other Investments of RM7.6 million & deposit forfeited of RM21.8 million for proposed acquisition of  a 20%-stake in a solar power project in China. If these losses were not booked into the account, VS's pre-tax profit would improve by 72% q-o-q to RM38 million.


Table: VS's last 8 quarterly results


Chart 1: VS's last 46 quarterly results

Valuation

VS (closed at RM1.34 yesterday) is trading at a trailing PE of 13 times (based on last 4 quarters' EPS of 10.19 sen). At this PER, VS (a cyclical stock) is deemed fairly valued.

Technical Outlook

VS has been trading sideways since it broke below its 20-week SMA line in January. The stock is supported by the horizontal line at RM1.15.


Chart 2: VS's weekly chart as at Sep 28, 2016 (Source: ShareInvestor.com)

On the monthly chart, VS seems to have peak. MACD has crossed below the MACD signal line.


Chart 3: VS's monthly chart as at Sep 28, 2016 (Source: ShareInvestor.com)

Conclusion

Based on weaker financial performance and prior sharp price run-up, I would rate VS as a SELL INTO STRENGTH.

Note:

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.