Results

1Q14 top line of RM22.8m was translated into a core net profit of RM4.0m, accounting for 11.4% of HLIB full year estimate. However, we regard this to be within expectations as 1Q is seasonally the weakest historically (1Q13 core net profit of RM458k accounted for 1.9% of FY13).

Deviations

In line.

Dividend

Proposed tax-exempt special and final dividends of 1.5 sen and 0.5 sen per share, respectively for FYE13 to be approved at the forthcoming AGM. The entitlement and payment dates have yet to be finalized.

Highlights

1Q14 revenue increased 76.6% yoy as sales of all three product lines surged, with MVS, ABI and ECS grew by 208%, 35% and 36% yoy respectively. Higher demand from customers is attributable to the improving business outlook in the semiconductor and electronics industries.

Sequentially, turnover fell by 20.0% mainly due to lower sales recorded for ABI which contracted 41% qoq, no thanks to the seasonally factor.

However, EBITDA margin gained by 1.1-ppt qoq due to its product mix as the highest-margin-MVS sales growth outpaced ABI and ECS.

ViTrox is optimistic on the growth prospect in FY14 with focus on market expansion activities, customer relationship building and product innovation.

Analyst briefing will be hosted this morning which we expect to grasp better understanding of the company outlook.

Comments

Referring to SEMI Mar preliminary data, semiconductor equipment industry’s book-to-bill ratio was 1.06, sustaining above parity level since Sept 2013.

3-mohth average of worldwide bookings in Mar 2014 was USD1.28bn (-1.2% mom and +16.1% yoy).

3-mohth average of worldwide billings in Mar 2014 was USD1.21bn (-5.9% mom and +22.3% yoy).

Risks

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

Forecasts

Unchanged pending analyst briefing.

Rating

UNDER REVIEW, TP: RM1.70

Positives – undisputed 3D-AOI and AXI technology leader, great potential in winning more market share in the advent of global semiconductor recovery.

Negatives – MVS-S sales is dependent on single customer, majority of sales are non-recurring, highly competitive 2DAOI market and prone to rapid advances in technology.

Valuation

Stock rating under review with unchanged TP of RM1.70 pending more management guidance from forthcoming analyst briefing. TP is pegged to 5-year historical average P/E multiple of 9.9x (see Figure #3).

Source: Hong Leong Investment Bank Research - 23 May 2014