Maybank IB Research remained cautious on VSI’s outlook as demand for consumer electronic products was expected to remain muted due to a weaker global economy.
PETALING JAYA: VS Industry Bhd
(VSI) has made progress in its environmental, social and governance (ESG) framework, but the gaps remained, says Maybank Investment Bank (Maybank IB) Research.
On a positive side, there is no evidence of identified controversies related to the electronic manufacturing services (EMS) provider’s three key ESG initiatives, namely building a responsible supply chain, reducing carbon emissions, and investing in capability, training and resources.
“It has a good track record and has made continuous efforts in improving its ESG strategies as reflected in its rating improvement appraised by the independent agencies,” the research house said in a report yesterday.
Maybank IB Research latest assessment of VSI’s established ESG framework and internal policies had yielded an overall ESG score of 56 (out of 100), which is above average.
The bank’s assessment of VSI’s ESG measures showed that the EMS maker was committed to align its human rights conduct with the United Nations Guiding Principles on Business and Human Rights.
The company implements human rights screening, training and monitoring of not only its internal operations, but also its supply chain partners.
It also upholds the Responsible Business Alliance or RBA Code of Conduct (aligned with international norms and standards) in managing human rights and its labour force which include free employment, zero tolerance for child labour, minimum wages and overtime law compliance, equality and freedom of discrimination, health and safety, talent developments.
Maybank IB Research, however, noted a gap in its carbon emission targets as VSI does not have a clear carbon emission reduction target.
VSI has started to trace Scope 3 emissions in financial year 2022 and is in the midst of installing solar panels at selected sites to increase renewable energy sources.
Another issue is its poor board diversity and independency.
Independent directors do not make up the majority of the board at VSI and there was only one woman on its board (9%) versus at least 30% women directors as recommended by the Malaysian Code on Corporate Governance.
The research house, however, said the company’s board has affirmed that in the event of any vacancy in future, gender diversity will be one of the criteria it will consider in the evaluation and selection process to fill the role.
Maybank IB Research also remained cautious on VSI’s outlook as demand for consumer electronic products was expected to remain muted due to a weaker global economy.
“Until production volume and factory utilisation pick up, we expect group margin to remain under pressure due to inefficient operating leverage,” the research house noted.
Maybank IB Research has maintained its “hold” call on VSI with a target price of 80 sen pending re-rating catalysts.
