Results

FY13 top line of RM106.1m was translated into a core net profit of RM24.1m, which is within expectation as it accounted for 98.9% of HLIB full year estimate.

In 4Q13, sales came in at RM28.5m (-15.3% yoy, -21.4% qoq), EBITDA of RM5.0m (-35.6% yoy, -57.6% qoq), and normalized PATAMI of RM5.3m (-30.0% yoy, -55.7% qoq).

Deviations

In line.

Dividend

Declared and paid an interim tax exempt dividend of 1 sen per share on 20 Jan 2014. YTD dividend amounted to 2.25 sen per share (FY12: 1 sen).

Highlights

4Q13 revenue fell 15.3% yoy mainly due to decrease in sales from MVS products, reflecting lower demand from existing customers and downturn in the semiconductor industry in 2013.

Sequentially, turnover also plunged by 21.4% attributable to the decrease in sales recorded for ABI and MVS products. This was mainly due to seasonality nature of the semiconductor and electronics industries.

Top line contraction was to blame for the dismal EBITDA margin recoded in 4Q13 at 17.5%, -5.6-ppt yoy and -15.0- ppt qoq.

ViTrox believes that 2014 will be a growth year considering the recovery of global semiconductor industry and improving US, Japan and European markets. Thus, it is optimistic on the growth prospect in FY14 with focus on market expansion activities, customer relationship building and product innovation.

ViTrox will be hosting an analyst briefing this morning which we expect to grasp better understanding of the company outlook.

Comments

Referring to SEMI Jan preliminary data, semiconductor equipment industry’s book-to-bill ratio was 1.04, sustaining above parity level since Nov 2013.

President and CEO of SEMI, Denny McGuirk commented that both bookings and billings are at values higher than reported a year ago and are good indications of growth in 2014 equipment market as device makers are investing in 20nm technology and advanced device structures, with leading packaging houses focusing their investments on flig chip, wafer-level and 3D packaging.

Risks

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

Forecasts

Unchanged pending analyst briefing.

Rating

HOLD, TP: RM1.12

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

Maintain HOLD rating on the stock with unchanged TP of RM1.12, pending more management guidance from forthcoming analyst briefing. TP is pegged to 5-year historical average P/E multiple of 9.9x (see Figure #4).

Source: Hong Leong Investment Bank Research - 28 Feb 2014