Results

Disappointing 1H13 top line of RM41.3m was translated into core net profit of RM6.9m, accounting for 26.5% and 28.6% of HLIB and consensus full year estimates respectively.

However, we deem this result as largely within expectations as 2H is traditionally stronger due to seasonality (1H12 core net profit of RM4.8m accounted for 29.3% of FY12).

In 2Q13, ViTrox registered revenue of RM28.4m (+24.8% yoy, >+100% qoq), EBITDA of RM5.7m (-0.5% yoy, >+100% qoq), and normalized PATAMI of RM6.5m (+13.0% yoy, >+100% qoq).

One-off adjustments which amounted to RM4.1m in 2Q12 comprises of gain on disposal of PPE (RM1.9m) and grant related to income (RM2.1m).

Deviations

Largely in line.

Dividend

None.

Highlights

2Q13 sales gained strongly on the back of demand surge for MVS and ABI products which expanded 362% and 47% qoq respectively. Higher MVS revenue was mainly derived from positive acceptance of the new Tray Vision Handler (MVS-T). On the yoy basis, MVS sales increase by 82%.

However, top line growth was not reflected in EBITDA which was flat yoy due to increase in selling and distribution expenses and decrease in other operating income such as grant related income.

The improved performance has led ViTrox to believe that the demand for their products will be sustainable for the remaining of the year. 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 this morning which we expect to grasp better understanding of the company outlook.

Comments

Referring to SEMI July preliminary data, semiconductor equipment industry’s book-to-bill ratio was 1.00, sustaining above parity for the past 7 months albeit some moderation was observed.

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 - 23 Aug 2013