KUALA LUMPUR (June 24): AmInvestment Bank has downgraded V.S. Industry Bhd (VSI) to “Underweight” at RM1 with a lower fair value of 80 sen (from 83 sen ), pegged to an unchanged FY21F target PE of 10x following a recent run-up in its share price.

In a note today, the research house slashed its FY20F earnings for VSI by 19% to account for the impact of the movement control order (MCO) on its margins and reduce FY21F–FY22F forecasts by 3–6%.

It said VSI’s 3QFY20 came in beneath expectations, at a core loss of RM15 million, bringing 9MFY20 core profit to RM63 million after excluding one-off net losses amounting RM1 million as forex losses were slightly offset by a gain on disposal of PPE.

AmInvestment said VSI’s overall FY20F group revenue is expected to be lower year-on-year (y-o-y), with its longer term prospects remaining intact.

The research house said VSI’s Indonesian segment is expected to still reach breakeven while China operations losses will continue to narrow y-o-y.

“We expect to gain more clarity on the group’s FY21F outlook at VSI’s upcoming results conference call.

“Despite VSI’s positive longer term prospects, its FY20F outlook has been weighed down by the impact of the Covid-19 pandemic while we reckon that the stock’s upside has already been factored in at its current price,” it said.