Likelihood that Monday might not be a good day for VIS short term investor due to the revenue and earnings in Quarter 3 (Q3) slightly drop compared the Q2. But something important that was highlighted in the quarterly report which had never mentioned before and should draw investor’s attention. That's why this important for an investor to do their homework before they buy or sell a stocks.

Volatility Earnings

Earnings in VIS is not consistent but this Q3 result still not showing a signal of weakening in their business yet. Furthermore, this is not the worst quarter as what happen in Financial Quarter 31 Jan 2017. The ideology is every investor is hoping that the earnings are keep increased in line with revenue. However, this is not the case all always. Time of completion of each contract is different. Different part of machine produced might have different completion date. Management didn’t disclose the order book in hand, but we can get the answer indirectly.

Make to Order

VIS have been pursuing “Make to order” in their business model. This means that the company only commenced their production once an order is confirmed so that they can reduce their inventory waste and obsolete. Do you noticed that the inventory have been increasing? Good Sign? Or Bad Sign? 

Potential Sales

Inventory turnover ratio have been improving since financial year 2017 from Q1 to Q3. However, if this inventory can't be sold, it is worthless to the company. This is unlikely that the management hint that this inventory were high potential sales of the company. Therefore, we should be able to expect a further growth in their coming quarter. If not, why company is spending extra RM3.2Mil in purchasing material?

High Working Capital Requirements

Decreased of cash in hand and further increased of bank borrowing caused an outflow of cash flow of the company. Where is the money flow into? You can get your answer from here:

Conclusions

Overall view, EPS current year 9 months cumulative to date 31 July 2017 3.8 cents doubled against last year 1.94 cents. The management indicate a positive answer for coming quarter result. So don’t over rely on one quarter and spoils your golden egg.

A good company consistently rewarding their shareholders either in dividend payout, bonus entitlement and etc. The management proposed bonus issue and free warrant to rewards their existing shareholders and continue to stay loyalty and grow with the company. So I'm curious why existing shareholder are worried for?