Update on *VS Industry (VSI MK, BUY, TP:MYR1.96 based on 23x FD CY22F EPS).*
The company shared that it has acquired 3 parcels of adjacent land for *future capacity expansion measuring 386k sf, or 8.9 acres in Senai, Johor (within close proximity of its existing facilities) for MYR30m.*
Currently, the Group’s Malaysia operations have a built-up area of 2.1m sf. spanning across more than 50 acres of land. The latest land acquisition will *boost VS’ total land area to close to 60 acres in total*.
*The Group’s existing capacity has been fully allocated to its existing customers.*
*We take the land acquisition positively as this signifies management’s optimism and confidence on the sustainable order flows prospects.* Its balance sheet is sturdy enough to fund the purchase with close to zero net gearing as at 4QFY21.
On the prevailing challenges of labour supply, components shortage and pandemic, management has taken various measures to minimize and mitigate the impact and therefore is *not expecting any major disruption to its operations.*
*VS is scheduled to release its 1QFY22 results on 16th Dec* and we expect more guidance to be provided on the orders and volume for 2022 by then.
We do not expect any immediate earnings impact from the land purchase and *make no changes to our earnings forecasts and recommendation.* 19/11/2021 10:27 PM
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