Vicplas shares slump in active trading after board slashes dividend by half

Singapore

SHARES of Vicplas International, which makes medical devices and pipes, sagged on Monday despite an improvement in the group's bottom line for its fiscal year ended July 31.

The mainboard-listed stock fell as much as 30 per cent or 13.5 Singapore cents to an intra-day low of 31.5 cents within the first minute after the opening bell. It regained some ground to finish 21.1 per cent or 9.5 cents lower at 35.5 cents.

Vicplas shares clocked the second highest volume on the Singapore bourse for the day, with 45.6 million shares changing hands.

A total of nine large trades - each with a value of more than S$150,000 - were done after market open, according to Shareinvestor data.

In results released on Monday before market open, Vicplas directors proposed a final dividend of 0.375 Singapore cent per share for FY20.

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This is half of what was paid out in FY19, when the board had declared a final dividend of 0.5 cent per share plus a special dividend of 0.25 cent per share.

The group on Monday noted that although its profit after tax for FY20 improved year on year, that was thanks to non-recurring negative goodwill as well as Covid-19 related subsidies from governments to mitigate the coronavirus pandemic's impact.

Such subsidies are likely to be of a lower quantum in FY21, Vicplas said.

It added that it needs to strike a balance between rewarding shareholders and maintaining sufficient capital to continually develop the business.

This takes into account the challenging operating environment and outlook for FY21, the group's working capital and cash flow requirements, and the need to preserve financial capacity to prepare for expected capital expenditure relating to the establishment or acquisition of a fifth plant for the medical devices segment, Vicplas noted.

The company on Monday said it may set up or acquire a fifth plant outside China for manufacturing medical devices to diversify and attract potential customers, although these plans are at an early stage.

If approved by shareholders at the Nov 26, 2020 annual general meeting, the final dividend of 0.375 cent per share will be paid on Jan 15, after books closure on Jan 6.

Net profit for Vicplas increased by 17.7 per cent to nearly S$5 million for the year ended July 31 from S$4.2 million a year earlier.

Earnings per share stood at 0.98 cent, up from 0.84 cent in FY19.

Top line grew 10.8 per cent to S$88.8 million, driven by higher revenue from the medical devices segment due to increased orders from customers. The segment makes products such as medical disposables, diagnostic devices and drug delivery systems.

Over the longer term, the medical devices arm will continue to face uncertainties in international trading conditions as a result of the US-China trade tensions and the Covid-19 outbreak, said Vicplas.

Meanwhile, its pipes and pipe fittings segment's revenue fell as a result of the four-month stoppage of most construction projects in Singapore as part of the government's measures to contain the spread of Covid-19.

There was also a slow recovery after, as the construction industry adjusted to new work arrangements with enhanced safety measures.

The pipes and pipe fittings segment's revenue for H1 FY21 is expected to be lower than in H1 FY20 (which was not affected by the pandemic).

However, the segment's revenue will likely be higher for H2 FY21 compared with H2 FY20, amid gradual recovery in the construction industry, Vicplas added.