“We lift FY26 forecast earnings by 18% as we pencil in RM900mil of sales contribution from its Philippines operations,” RHB Research said.
PETALING JAYA: With VS Industry Bhd
’s customer diversification plan gathering pace, RHB Research is upbeat about the electronics manufacturing services provider’s near term earnings, driven partly by its expansion plans in the Philippines.
The research house said the company’s three-year earnings compounded annual growth rate of 28% would be underpinned by a significant market share gain facilitated by its expansion plan in the Philippines, progressive contributions from newly developed capabilities and new opportunities arising from the trade war diversion.
On the Philippines, the research house noted that VS Industry’s management had viewed it as a strategic opportunity to grow its market share with customer X and said its superior expertise as well as track record would minimise execution risks.
In addition, it added that the asset-light model to be adopted in the initial stage of the venture would bring about lower fixed costs, hence a lower sales threshold (RM300mil) to breakeven.
Meanwhile, it said an equity raising exercise to raise up to RM534mil had been initiated to fund the capital expenditure and working capital requirements estimated at RM400mil to RM500mil.
“Our base case assumes a muted earnings impact in forecast financial year 2025 (FY25) with the initial start-up losses in the third quarter of FY25 to be offset by the maiden earnings subsequently in 4Q25.
“We lift FY26 forecast earnings by 18% as we pencil in RM900mil of sales contribution from its Philippines operations,” it said.
The research house, which is maintaining its “buy” call on VS Industry with a new target price of RM1.49 from RM1.38 previously, said risks to its recommendation include major delays in expansion plans and significant loss of market shares.
