VSI's 43.6%-owned subsidiary, VS International Group (VSIG) recently announced that it is expected to record 10x increase in net profit for 1HFY17F (1HFY16: RMB1.12mil). This suggests that China operations have turned a corner in 2QFY17 (1QFY17 PBT loss: RM4.9mil), and based on our back-of–the-envelope estimates, this would translate to approx RM3mil in net profit to VSI in 1HFY17F. Recall that Perfect China has awarded a RMB400mil or approx. RM242mil contract to VSIG to manufacture a new purifier model for the Chinese market in 2016. We expe

STOCK FOCUS OF THE DAY

V.S. Industry : Strong growth trajectory underway           BUY

We maintain our BUY call on V.S. Industry (VSI) with a higher SOP-based TP of RM1.90, based on: (i) higher target PER of 13x (from 12x) on FY18F EPS to reflect its higher growth prospect going forward. Its premium valuation over its peers is justified by its higher earnings CAGR of 24% (vs peers' average of 12.8%); and (ii) earnings revision of +2% for FY18F as we tweak our box-build sales volume assumption higher by 7%. Its share price has risen 12% since our initiation end-Jan'17, yet we think the rally still has legs – supported by strong earnings visibility in the coming quarters from the ramp-up in orders for Customer X and notably, a convincing turnaround of its China operations. Opportunities for higher box-build orders from Customer X would provide fresh catalyst for earnings upgrade. We expect VSI's upcoming 2QFY17F core profit to be stronger YoY, mainly driven by higher revenue contribution from Customer X and Perfect China.

VSI's 43.6%-owned subsidiary, VS International Group (VSIG) recently announced that it is expected to record 10x increase in net profit for 1HFY17F (1HFY16: RMB1.12mil). This suggests that China operations have turned a corner in 2QFY17 (1QFY17 PBT loss:  RM4.9mil), and based on our back-of–the-envelope estimates, this would translate to approx RM3mil in net profit to VSI in 1HFY17F. Recall that Perfect China has awarded a RMB400mil or approx. RM242mil contract to VSIG to manufacture a new purifier model for the Chinese market in 2016. We expect VSI to see rising orders from Customer X, which may possibly include a new product category and an enhanced version of the existing product category in FY18F. This would position VSI for a bigger play to tap Customer X's worldwide success and would present fresh catalyst to our earnings forecast. VSI remains the only VI-supplier for Customer X in Malaysia, which puts the group in a sweet spot to see stronger order flow.

Others :

Media Prima : New acts to stay on prime time    BUY

QUICK TAKE

Plantation Sector : Key takeaways from palm oil conference – Day 1        NEUTRAL

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ECONOMIC HIGHLIGHTS

Philippines : Inflationary pressure remains strong

Euro : Challenging 2017

NEWS HIGHLIGHTS

Telekom Malaysia : Inks agreement to deploy HSBB to more than initial 1.3 million premises target

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