KUALA LUMPUR – After VS Industry Berhad posted a net loss of RM19.5 million (US$4.6 million) for its fiscal third quarter ended April 30, analysts expect the firm’s fiscal fourth quarter to be profitable, despite challenges related to Covid-19, according to reports.
JF Apex Securities Research analyst Lee Chung Cheng said while VSI is expected to post a profit in the fiscal fourth quarter, fiscal 2020 and 2021 will be a challenge because of strict movement control measures and anticipated fewer orders. VSI’s large UK customer is expected to lower orders.
"For its US customer, management guided earlier that the second and third models will only commence in fiscal 2021 from the initial schedule of March this year. Overall, the group expects its fiscal 2020 top line and bottom line to be weaker than fiscal 2019," Cheng said.
The company expects Indonesia and China operations to “continue bleeding.”
VSI may make up for order backlogs following the resumption of production at its Malaysian operations that started in late April, driven by more orders from a US customer.
Ching is cutting VSI's fiscal 2020 estimates by 35.1% because of the six-week shutdown in Malaysia and higher operational costs. Fiscal 2021 and 2022 net profit estimates have been trimmed by an average of 6%.
RHB Research analyst Soong Wei Siang said fiscal third quarter earnings forecasts have been cut from fiscal 2020 to fiscal 2022 by 27%, 9% and 9% respectively.
"We believe VSI will return to the black in the fiscal fourth quarter 2020. Meanwhile, the process of securing new customers was affected by border closures, and management expects meaningful progress to be achieved only after the travel restrictions are lifted. We highlight management has remained committed to the policy of paying out at least 40% of net profit as dividends and note VSI is now in a net cash position (RM147 million in the fiscal third quarter,” Siang said.
In the first fiscal nine months of 2020, net profit fell 37.4% to RM61.7 million, with revenue dropping 19.7% to RM2.4 billion.
Ed.: RM 1 = US$0.24