The chart below shows that our ringgit has fallen from Rm 3.20 to Rm 4.35 ( 35%) in one year.
All manufacturers which sell their products in US$ will benefit. The additional 35% profit requires no additional effort. They do not need additional raw materials, labour, capital, expenditure etc to make additional profit, literally profit for doing nothing.
The normal profit for a fairly good company is between 5-10% per year.
VS Industry, Latitude Tree and Lii Hen export about 90% of their products in US$. VS is the Malaysia largest computer Chip manufacturer. Latitude Tree and Lii Hen are the 2 largest Malaysia furniture manufacturers.
I have been recommending these 3 shares for a long time. Many smart readers have benefitted but there are only a few critics who obviously did not buy these shares. VS is my largest investment.
I am obliged to tell you that I am a substantial shareholder of the above mentioned 3 companies.
Lii Hen: Price shot up from Rm 2.50 to Rm 7.00 with in 12 months
Latitude Tree: Price shot up from Rm 1.00 to Rm 7.30 within 24 months.
VS Industry: Price shot up from Rm 1.50 to Rm 7.05 within 15 months (One share split to 5 shares)
Is VS still a good buy after it has gone above Rm 7.00 or Rm 1.40 after the share split?
The above chart is encouraging you to buy. My reasons are:
Its 3rd quarter eps was 39.80 sen while MPI’s was 39 sen. MPI’s 4th quarter eps was 18 sen as announced at end of Aug. making its annual eps of 57 sen.
VS will announce its 4th before end of Sept. as its financial year end in July. VS’s quarterly revenue is always about 30% more than MPI. VS exports about 90% of its products in US$ and in view of our Ringgit being 17 year low, we can expect VS to announce a higher profit than MPI.
The CEO of VS gave an interview which was reported by the Star newspaper recently and KLSC queried him.
Here is his explanation as announced on Bursa:
We refer to the article “Exciting time for VS” published in The Star newspaper dated 5 September 2015. We wish to clarify as follows:-
We confirm that almost 90% of sales are transacted in US Dollar
We confirm that VS hopes to achieve 10% to 15% growth in terms of sales and net profit for the financial year ending 31 July 2016.
After reading this CEO’s statement, I strongly believe VS has very good profit growth prospect for this year and next year.
As you know KLCI has been dropping for more than 2 years and foreign institutional investors have been selling and running away. In spite of this fact, VS is still going up with huge daily transaction. I can imagine when the foreign fund managers return, they will rush to buy VS.
This article was written by Koon Yew Yin.