Results

Slightly stronger-than-expected 9M13 top line of RM77.6m was translated into a core net profit of RM18.8m, which is within expectation as it accounted for 71.7% of HLIB full year estimate.

In 3Q13, ViTrox registered revenue of RM36.3m (+52.4% yoy, +28.0% qoq), EBITDA of RM11.8m (>+100% yoy, >+100% qoq), and normalized PATAMI of RM11.9m (>+100% yoy, +83% qoq).

Deviations

Largely in line.

Dividend

The board has approved an interim tax-exempt dividend of 1.0 sen per share (9M12: none). However, the entitlement and payment dates have yet to be finalized and will be furnished at a later date.

Highlights

3Q13 revenue gained strongly on the back of demand surge for ABI products which expanded 105% yoy and 98% qoq. The increase was mainly due to significant increase in sales recorded for Advanced X-ray Inspection (AXI) System.

Top line growth has spurred 3Q13 EBITDA margins to improve significantly by 17.1-ppt yoy and 12.5-ppt qoq to 32.5%.

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 on 25th Nov which we expect to grasp better understanding of the company outlook.

Comments

Referring to SEMI Oct preliminary data, semiconductor equipment industry’s book-to-bill ratio rebounded to 1.05 after dipping below parity for the months of Aug and Sept.

President and CEO of SEMI, Denny McGuirk commented that order activity is well above the figures reported one year ago and point towards on-going investments in advanced process technologies for NAND flash, microprocessor and foundry.

Risks

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

Forecasts

Unchanged pending analyst briefing.

Rating

Under Review, 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

Stock rating under review 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 forthcoming analyst briefing.

Source:Hong Leong Investment Bank Research - 22 Nov 2013