VS: Earning Recovery Has Not Begun

Result Update

For QE31/7/2018, VS's profit before tax rose 83% q-o-q or 4% y-o-y to RM38 million while revenue rose 15% q-o-q or 3%  y-o-y to RM1.01 billion. Meanwhile, profit before tax decreased 48% y-o-y or RM22.8 million to RM25.0 million due to RM16.9 million loss on disposal of a subsidiary, net forex loss of RM5.3 million (as compared to gain of RM2.5 million previously) impairment loss on properties of RM3.0 million and share of loss of associates of RM7.0 million.


Table 1: VS's last 8 quarterly results


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

From the graph below, we can see that VS's revenue rebounded after the lull in calendar 1st quarter. However profits still remained soft.


Graph: VS's last 54 quarterly results

Financial Position

As at 31/7/2018, VS's financial position has improved slightly with current ratio at 1.5 times and gearing ratio at 0.9 time.

Valuation

VS (closed at RM1.62 yesterday) is trading at a trailing PE of 15 times (based on last 4 quarters' EPS of 10.92 sen). At this PER, VS is deemed fairly valued.

Technical Outlook

From its peak of RM2.50 in early 2018, VS has declined to a recent low of RM1.26. It is trying to form a base of around RM1.50-1.60, which is below the long-term uptrend line.


Chart: VS's weekly chart as at Sep 25, 2018 (Source: Malaysiastock.biz)

Conclusion

Based on satisfactory financial performance & financial position and reasonable valuation, VS is still a good stock for long-term investment. I maintain my rating for VA as a HOLD.

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.