VS Industry Bhd
(Dec 15, RM1.53)
Maintain underperform with fair value of RM1.40: We attended the opening ceremony of a new factory that will be dedicated to the production of Keurig Coffee Brewers. VSI has already commenced production of the first model, the Mini-Plus Brewing System, and will begin its maiden shipment in 3QFY12.
VSI’s production capacity for this model is about 23,000 to 25,000 units per month. We understand that VSI will add another assembly line with a capacity of 30,000 to 40,000 units per month for the shipment of another brewer model by FY13.
Presently, VSI’s capacity will only represent 11% to 13.9% of total brewer shipments of 5.8 million for Keurig. This could present VSI with an opportunity for higher sales volume with additional models.
Keurig is a pioneer and leading manufacturer of gourmet single-cup brewing systems for both household and corporate users and mainly caters for the US and Canada markets.
According to market research firm NPD, Keurig is estimated to have 20% to 25% of the total market for single-cup brewing systems in the US. The brewing system uses portion packs called the “K-Cup”, which contain ingredients to brew single servings of beverages.
The brewer provides a faster and a more convenient setup than conventional coffee machines.
Keurig is a wholly-owned subsidiary of US-based company Green Mountain Coffee Roasters (GMCR), which develops its own brand of portion pack K-Cup beverages. GMCR is listed on Nasdaq.
Keurig mainly markets its coffee brewers to North America. These brewers are considered high-end, with a price range of US$99.99 (RM320) to US$249.99 per unit, a 15% to 20% premium to its closest alternative. With the onset of a slowdown in economic growth especially in the US, this could result in down-trading by customers. The key risk is deterioration in the global macroeconomic environment. We maintain our forecasts for now.
Although VSI has yet to see a slowdown in orders, we remain wary on the global economic outlook. However, following the recent run-up to the share price, valuations are no longer compelling.
We downgrade our call to “underperform” (from “market perform”) with a fair value estimate of RM1.40 per share based on six times CY12 earnings per share. However, net dividend yield of 6.8% to 7.4% should provide some support to the share price. — RHB Research, Dec 15
(Dec 15, RM1.53)
Maintain underperform with fair value of RM1.40: We attended the opening ceremony of a new factory that will be dedicated to the production of Keurig Coffee Brewers. VSI has already commenced production of the first model, the Mini-Plus Brewing System, and will begin its maiden shipment in 3QFY12.
VSI’s production capacity for this model is about 23,000 to 25,000 units per month. We understand that VSI will add another assembly line with a capacity of 30,000 to 40,000 units per month for the shipment of another brewer model by FY13.
Presently, VSI’s capacity will only represent 11% to 13.9% of total brewer shipments of 5.8 million for Keurig. This could present VSI with an opportunity for higher sales volume with additional models.
Keurig is a pioneer and leading manufacturer of gourmet single-cup brewing systems for both household and corporate users and mainly caters for the US and Canada markets.
According to market research firm NPD, Keurig is estimated to have 20% to 25% of the total market for single-cup brewing systems in the US. The brewing system uses portion packs called the “K-Cup”, which contain ingredients to brew single servings of beverages.
The brewer provides a faster and a more convenient setup than conventional coffee machines.
Keurig is a wholly-owned subsidiary of US-based company Green Mountain Coffee Roasters (GMCR), which develops its own brand of portion pack K-Cup beverages. GMCR is listed on Nasdaq.
Keurig mainly markets its coffee brewers to North America. These brewers are considered high-end, with a price range of US$99.99 (RM320) to US$249.99 per unit, a 15% to 20% premium to its closest alternative. With the onset of a slowdown in economic growth especially in the US, this could result in down-trading by customers. The key risk is deterioration in the global macroeconomic environment. We maintain our forecasts for now.
Although VSI has yet to see a slowdown in orders, we remain wary on the global economic outlook. However, following the recent run-up to the share price, valuations are no longer compelling.
We downgrade our call to “underperform” (from “market perform”) with a fair value estimate of RM1.40 per share based on six times CY12 earnings per share. However, net dividend yield of 6.8% to 7.4% should provide some support to the share price. — RHB Research, Dec 15
