V.S Industry Berhad (V.S) was founded in 1982 and listed on Bursa in 1998. It is now a leading integrated electronic manufacturing services (EMS) provider and successful ranked itself into the world's top 50 EMS providers from 2007 to 2012. V.S has its manufacturing facilities located at Malaysia, Vietnam, Indonesia and China, to cater for the demand of their clients which are mostly big multinational company. V.S manufacturing services included plastic injection mould design and fabrication, a wide range of injection tonnage and finishing processes, large scale production of printed circuit boards, automated assembly and final processes of packaging and logistics. Compare to before, V.S has expanded its operation to include products and services in the higher value-added chain.
Let's have a quick glance on V.S financial performance.
The compounded annual growth rate (CAGR) for revenue and net profit are 13% and 70% respectively.
A quick glance on the financial ratio, ROE is improving, profit margin is low as 3.8%, Gearing ratio up solely because of the company increase their stake on V.S international group limited(VSIG), dividend payout ratio is considered high as the company is having a dividend policy of minimum 40% payout.
Where is the revenue sources?
From the annual report 2013, we knew that Malaysia operation generated 88% of revenue, 8% are derived from Indonesia's operation, the balance are coming from China's operation. V.S increase of stake on VSIG making it one of their subsidiaries, and hereon will contribute to V.S top line and bottom line. The manufacturing plant in Malaysia and Indonesia primarily serve customers from Europe and US, while the China operation will be focus on Japan, Europe and US. We can see that most of the products of V.S are export oriented and apparently US Dollar will be the main currency been used. Despite of it, i don't think that V.S will be benefit on the strengthen of USD against MYR recently.
Taking a quick look on latest quarter result ended 31st October 2013, the outstanding performance is merely due to the consolidation of figures from VSIG. With that, China operation has increased its contribution to 33% of total revenue. However, it is still incurring a net loss for the quarter alone.
Future Prospect
The management of V.S is ambitious. They always focus on expanding their operation to higher value-added chain, while at the same time they need to keep their cost managed well to remain competitive.The company has allocated 20M as capital expenditure (CAPEX) for plastic injection machine for new coffee machine models and assembly lines on FY2014. Besides that, with the consolidation effect, we can expect an increase on the top line and bottom line for subsequent quarter on FY2014.
On PART 2, i will talk more on its business risk, management and valuation.
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