| Vicplas International ($0.45, up 0.5 cents) reported that its FY20 revenue increased by 10.8% to S$88.8 million driven by higher revenue from the medical devices segment which was partially offset by lower revenue from the pipes and pipe fitings segment. Overall, the Group recorded a net profit after tax of S$4.9 million in FY2020 as compared to S$4.2 million in FY2019, an increase of 16.6%. The revenue for the medical devices segment was S$61.4 million in FY2020, an increase of 36.2% from FY2019 due to increased orders from its customers. The revenue for the pipes and pipe fitings segment was S$27.4 million in FY2020, a decrease of 21.7% from FY2019 as a result of the four-month stoppage of most construction projects in Singapore due to governmental measures to contain the spread of Covid-19 and the slow recovery thereafter as the construction industry adjusts to new work arrangements incorporating enhanced safety measures. |
Forefront Medical, an integrated contract manufacturer for medical devices, is wholly-owned by VicPlas. Photo: CompanyThe medical devices segment has continued its positive momentum, even as its operations were impacted by the Covid-19 pandemic and the effects of such pandemic on the global economy.
The segment recorded another financial year of positive segmental results which grew from S$2.8 million in FY2019 to S$7.9 million in FY2020, an increase of 179.5%.
Over the longer term, the segment will continue to face uncertainties in international trading conditions as a result of the ongoing US-China trade tensions and the Covid-19 pandemic.
As the segment looks to expand its manufacturing options in tandem with its strategy towards becoming a global contract manufacturer for medical devices as well as mitigate its China supply chain risk, the Group is making plans to establish or acquire a fifth plant outside China for manufacturing medical devices for diversification and atrracting new potential customers.
As these plans are at an early stage, no assurance can be given at this moment regarding when a fifth plant will be established or acquired, if at all.
The pipes and pipe fitings segment operates in a very competitive environment which has resulted in the lowering of margins over the last few years.
With the Covid-19 outbreak, the construction industry in Singapore is facing a challenging time as it recovers gradually from a four-month stoppage of most construction projects due to governmental measures to contain the spread of Covid-19.
This situation, coupled with manpower and supply chain disruptions, has resulted in project delays and deadline extensions which have a substantial adverse effect on the revenue for this segment, with a 21.7% decrease from FY2019 to FY2020 concentrated in the second half of FY2020.
Despite the impact of the Covid-19 pandemic, the Group has grown its revenue and profit after tax in FY2020 by 10.8% and 16.6% respectively as compared to FY2019.
Although the Group expects to continue growing its revenue in FY2021 as compared to FY2020, its rate of growth is expected to moderate in FY2021 given the higher base revenue in FY2020 and the operating environment discussed above and below.
Vicplas market cap stands at S$228.5mln and currently trades at 46.7x Historical P/E and 3.1x P/B, Dividend yield is only 0.8% and net gearing stands at 6.7%. |