+ Stellar balance sheet, record net cash. Net cash as at end-March 2021 was S$989mn. A record for VMS. Operating cash flow built up from higher earnings and stable working capital. We expect higher dividends from its large cash hoard and improving operating environment.
+ Margins expanded despite sluggish sales growth. 1Q21 PBT margin of 10.9% was an improvement over 1Q20’s 10.4% and above 2015-16 margins of 8% when revenue was at similar levels. VMS’ shift to more sophisticated and leading-edge products was a major contributing factor, in our opinion.
– Revenue growth sluggish. 1Q21 revenue only expanded 2% YoY. This was paltry considering 1Q20 revenue had collapsed 27.5% YoY under severe disruptions of supply chains in China and Malaysia. VMS attributed this year’s weakness to shortages of parts and components.
Company has guided for: 1) QoQ improvement in 2Q21 earnings; a 2) a stronger 1H21 YoY; 3) broad-based strength across domains; 4) strength in leading-edge healthcare products; and 5) an impending launch of new semiconductor and networking products.
Maintain NEUTRAL with unchanged TP of S$19.20
Our forecasts are unchanged as we expect stronger revenue momentum in the coming quarters.
#Note – There was no results briefing or detailed financials for 1Q21. Only an executive summary and general comments were furnished.