Results

1Q13 core net profit of RM458k came below expectations, as it accounted for 1.7% and 1.9% of HLIB and consensus forecasts respectively.

In 1Q13, ViTrox registered revenue of RM12.9m (+49.7% yoy, -61.6% qoq), EBITDA of RM131k (+113.1% yoy, - 98.3% qoq), and normalized PATAMI of RM458k (+148.8% yoy, -93.9% qoq).

Deviations

Lower-than-expected sales from all business segments.

Dividend

None.

Highlights

Profitable mainly due to the reversal of impairment loss on loans and receivables which was equivalent to reported PAT of RM458k. Excluding this, ViTrox would had just broke even during the quarter.

1Q13 effective tax rate was exceptionally high at 36.3% for a MSC and pioneer status company which enjoys tax exemption. This was mainly due to certain non-business income and non-tax exempted income generated from nonpioneer products.

Sales rebounded to RM12.9m yoy mainly due to the surge in ABI orders which recorded a 114% growth from larger and more diversified customer base.

However, sales tumbled qoq as all business segments suffered contractions in orders with MVS, ABI and ECS recorded reductions of 71%, 58% and 23% respectively. ViTrox attributed this to seasonal factors and sluggish global economic environment caused by prolonged weakness in Europe, Japan, US and China.

ViTrox shared that there were improvements in 2Q13 and believe that the demand for their products will be sustainable for the remaining FY13. ViTrox will continue to focus on market expansion activities, customer relationship building, product innovation and prudent cost management.

ViTrox will be hosting an analyst briefing 31st May which we expect to grasp better understanding of the company outlook.

Comments

Referring to SEMI April preliminary data, semiconductor equipment industry’s book-to-bill ratio was 1.08, sustaining above parity for the past 4 months.

We are not particularly disappointed with the results and believe this is purely seasonal (similar to FY12) trailing clients’ budget cycle with timing issue (lag in order delivery).

Risks

FOREX, downturn in semiconductor demand and equipment spending, patent infringement and technology imitation.

Forecasts

Unchanged pending analyst briefing.

Rating

HOLD, TP: RM0.74

• Positives – ViTrox has growth potential in the ABI segment with the exit of Agilent from this market.
• Negatives – ViTrox operates in a highly competitive market and prone to rapid advances in technology.

Valuation

• We maintain HOLD call on the stock with unchanged target price of RM0.74 based on DCF with a WACC of 11.8% and TG of 0% pending more management guidance from analyst briefing.

Source: Hong Leong Investment Bank Research - 27 May 2013