by ASILA JALIL / pic source i-Park Malaysia’s Facebook

THE labour shortage situation in VS Industry Bhd is expected to persist for the remainder of financial year 2022 (FY22) despite efforts to ramp up hiring of local workers, said Hong Leong Investment Bank Bhd. 

It noted the recruitment expenses could total up to RM30 million which is expected to be fully incurred this year and subsequently claimed from customers. 

“We understand that, if the recruitment process goes as planned with the 3,700 foreign labour quota allocated, VS Industry would be able to ramp up their operations by 40%. 

“The prospect remains intact with several discussions taking place with new customers to contribute positively to future earnings,” it said in a note yesterday. 

The group’s i-Park Senai Airport City facility started production in August 2021 and is currently running at sub-optimal capacity of 20%. The utilisation is only expected to improve once the required labour comes in.

The research firm said the group’s revenue guidance looks healthy at RM300 million for FY22 and RM800 million for FY23 and i-Park could be one of the biggest contributors to the group’s revenue once the production is at full capacity. 

It added that VS Industry will attract several potential clients that are already showing interest to visit the group’s factories once the international border reopens.

“We gather that the operations are currently running at full workforce capacity but still unable to fulfil the total orders demanded from customers.

“The prospect remains intact with several discussions taking place with new customers to contribute positively to future earnings,” it said. 

The research firm trimmed VS Industry’s earnings per share (EPS) forecasts for FY22 and FY23 by 21% and 13% respectively after taking into account lower top-line and margin challenges in the near-term. 

It maintained a ‘Buy’ recommendation for the group with a lower target price of RM1.21 from RM1.45 previously based on an 18 times precise-to-earnings ratio, pegged to 2022 EPS. 

“As the biggest electronics manufacturing services player in Malaysia with a solid track record, we opine that VS Industry is a prime beneficiary from the intensifying trade diversion theme,” it added.