PETALING JAYA: AmInvestment Bank Research (AmInvest Research) continues to be optimistic about the prospects of VS Industry Bhd
, underpinned by the fact that the company is a regional trade-diversion play, with operations in Malaysia, the Philippines and Indonesia.
The research house said, commencement of operations at the electronics manufacturing service provider’s Philippine operations set for April would drive earnings growth forecasts for the financial year ending July 2025 (FY25) to an improvement of approximately 44% year-on-year (y-o-y).
“Broadly within our expectations, indicated FY26 revenue contributions from the Philippines are RM800mil. While the total value of orders secured is RM1.2bil, it will take time for production to ramp up,” said AmInvest Research.
As VS Industry previously had no presence in the Philippines, certain processes would still be supported by its Malaysian operations in the initial days to facilitate a smooth start up, the research house added.
The research house said it believes, aside from expanding its regional reach, the group’s pipeline remains healthy, as earnings growth for the next two years is virtually sorted,
That said, it pointed out that the group is not resting on its laurels, bidding for RM1.4bil worth of new orders from a prominent global consumer-electronics brand, which would represents a 26% y-o-y increase to its forecast revenue of FY26.
“A decision could be made as early as the first quarter of 2025. The new orders aside, the group is still in discussions with a new medical-device customer. We view this as a positive form of diversification so as to be less reliant on consumer-electronic products,” the research house said.
It added, with the space vacated by another US home-appliances producer, the group now has capacity to take on a new anchor customer, with annual revenue potential of up to RM1bil.
Over the longer term, the research house is not discounting potential spillover effects from the establishment of the Johor-Singapore Special Economic Zone (JS-SEZ) for V. S. Industry, despite recognising that it is still early days.
It said the regions of Senai and Skudai, where the group’s manufacturing operations are located, are part of listed flagship zones.
“It has been reported that companies undertaking new investments in high growth and value-added activities within JS-SEZ, will benefit from a special tax rate of 5% for up to 15 years. These activities include medical devices, an area the group is currently pursuing,” noted AmnResearch.
Furthermore, similar to what has happened in Penang, there could also be supply chain localisation opportunities in our view, with government targets to attract 50 high value projects within five years.
The research unit is keeping both its “buy” call on the counter as well as its target price of RM1.45, based on a target price-earnings ratio of 17 times, representing an approximate 38% upside.
