PETALING JAYA: VS Industry Bhd’s growth prospects are intact, thanks to its customer diversification strategy.

The integrated electronics manufacturing services provider looks set to expand its production capacity to meet its growing clientele in a bid to boost its revenue stream.

CGS-CIMB Research said moving forward, it remained sanguine on the company’s order growth prospects, supported by increasing contribution from its newer customers.

Currently, VS Industry’s new facilities of about 414,000 sq ft of land at i-Park@Senai Airport City, Johor, are on track to be completed by mid-2021, which would cater for the production of its United States-based customer, with the first model to commence production by June-July 2021.

The research house, reiterating its “add” call on the stock, said the company at its recent briefing guided that orders from its US-based home care product customer and pool cleaner customer are expected to grow significantly over financial year 21 (FY21)-FY22, indicating possible further production capacity expansion in the future.

“We project capital expenditure to remain significant at about RM60mil-RM200mil over FY21-FY23, ” it noted. It said the company’s balance sheet remained strong, as it sat on a net cash position of RM199.0mil (about RM0.05 per share).

CGS-CIMB said it liked the company for its targeted customer diversification strategy.

This is because it remains actively courting new customers, and has proven to benefit from manufacturing diversions from trade tensions.

It noted that, however, the downside risks for VS Industry include a sharp slowdown in order flows from its key customers, and higher-than-expected operating costs.

The company’s one-for-one bonus issue went ex yesterday, following the issuance of up to about 1.9 billion shares, increasing the group’s share base to close to 3.8 billion.

“We believe that the bonus issue could improve the company’s trading liquidity, although it does not change the underlying fundamentals of the group, ” it noted.

The group expects the bonus issue to generate better participation from investors, which could lead to a broadening of the shareholder base.

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