VS: Earnings Dropped q-o-q

Result Update

For QE31/7/2017, VS's net profit dropped 27% q-o-q but rose 236% y-o-y to RM37 million while revenue rose 15% q-o-q or 77%  y-o-y to RM983 million. VS's profits dropped q-o-q mainly attributable to lower gross profit margin resulting from weakening of US Dollar against Ringgit Malaysia. In addition, profits decline was aggravated by impairment loss on property & other investment of RM12.0 million and RM4.0 million respectively.


Table: VS's last 8 quarterly results


Graph: VS's last 50 quarterly results

Valuation

VS (closed at RM2.53 yesterday) is trading at a trailing PE of 19.1 times (based on last 4 quarters' EPS of 13.22 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. It consolidated for a year in 2016 and broke above the horizontal line at RM1.60 in late January this year and then rallied to a recent high of RM2.68. All indications are this rally may continue.


Chart 1: VS's weekly chart as at Sep 27, 2017 (Source: MalaysiaStock.Biz)

VS is very well supported by either the 10 or 20-day SMA lines. You may use these lines to gain entry into the stock. That levels will be around RM2.40 mark in the next few weeks.

 
Chart 2: VS's daily chart as at Sep 27, 2017 (Source: MalaysiaStock.Biz)

Conclusion

Despite the drop in earning last quarter, VS is a good stock for long-term investment based on steady financial performance & positive technical outlook, Even though earning lagged the sharp rise in revenue, I believe earning may soon catch up. Thus, I revise my rating from SELL INTO STRENGTH to BUY ON WEAKNESS.

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.