KUALA LUMPUR, June 22 (Bernama) -- Bursa Malaysia ended on a softer note today as investors engaged in profit-taking following the recent rebound in the local market, an analyst said. At 5 pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) declined by 0.65 per cent, or 11.19 points, to 1,700.84 from last Friday's close of 1,712.03. The benchmark index opened 1.56 points lower at 1,710.47 and moved between 1,699.94 and 1,712.32 throughout the trading session. Market breadth was negative, with decliners outnumbering gainers 560 to 481. A total of 608 counters were unchanged, 1,649 untraded, and 14 suspended. Turnover slipped to 3.29 billion units worth RM2.40 billion from 3.45 billion units worth RM3.79 billion on Friday.
Analysts have reduced earnings forecasts for VS Industry Bhd (KL), anticipating that the strengthening ringgit against the US dollar will negatively affect its revenue for the financial year ending July 31, 2025 (FY2025). The company's significant reliance on US dollar-denominated sales, which account for around two-thirds of its total revenue, is expected to suffer due to adverse foreign exchange (forex) pressures.
Additionally, Maybank noted that slower growth for key customers, alongside export challenges, would further weigh on the company’s performance. Although some forex costs may be passed on to customers, adjustments may take three to six months, particularly for costs related to labor, management fees, and engineering.
Despite the cuts, Maybank remains cautiously optimistic about VS Industry's outlook due to its export earnings and forex exposure. The company's efforts to streamline operations and expand, including new projects in the Philippines and a potential new customer set for late 2024, are expected to support margins and contribute to growth by FY2026. Maybank maintained its 'buy' call, adjusting the target price (TP) to RM1.28 from RM1.49.
Similarly, Hong Leong Investment Bank (HLIB) also highlighted the short-term negative impact of the stronger ringgit but noted some offsetting factors. HLIB explained that where revenue is quoted in ringgit but costs are in US dollars, VS Industry could benefit from the weakening US dollar. However, for certain US-based customers, adjustments can only be made during the quotation of new models, which could further impact the top line by 8% to 10%.
HLIB maintained its 'buy' call on VS Industry, with an unchanged TP of RM1.42, citing the company’s leading position in electronics manufacturing services, a diverse customer base, and strategic capacity expansions, which are expected to sustain long-term revenue growth and profitability.
As of Thursday, shares of VS Industry were down two sen or 1.9% at RM1.03, with a market capitalization of RM4.05 billion.
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