Results

Outdid itself by registering another record breaking quarterly results of RM65.1m turnover and RM20.0m core PAT.

1H14 top line of RM87.9m was translated into higher-thanexpected a core net profit of RM24.0m, accounting for 68.4% of HLIB full year estimate. Deviations #p#Revenue mix as highest-margin-MVS sales outpaced ABI and ECS. Dividend #p#None (2Q13: none). Highlights #p#2Q14 revenue more than doubled yoy as sales of all three product lines surged, with MVS, ABI and ECS grew by 142%, 118% and 102% yoy, respectively. Higher demand from customers is attributable to the improving business outlook in the semiconductor and electronics industries.

Sequentially, turnover almost tripled as MVS, ABI and ECS sales grew by 263%, 137% and 50% qoq, respectively.

In view of positive market outlooks in the semiconductor and electronics industries, 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 June preliminary data, semiconductor equipment industry’s book-to-bill ratio was 1.09, sustaining above parity level since Sept 2013.

3-mohth average of worldwide bookings in June 2014 was USD1.47bn (+4.3% mom and +10.0% yoy).

3-mohth average of worldwide billings in June 2014 was USD1.34bn (-4.8% mom and +10.4% yoy).

Global Industry Analysts projected the global market for surface mount technology (SMT) equipment to reach USD5.3bn by 2018, driven by recovery in electronics and semiconductor industries, new products and the need to upgrade older production lines. Furthermore, Asia-Pacific represents the largest market worldwide, while Latin America is projected to emerge as the fastest growing marking with a CAGR of 7.2% from 2010 to 2018.

Risks

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

Forecasts

Unchanged pending analyst briefing.

Rating

BUY, TP: RM2.78

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

Reiterate BUY with unchanged TP of RM2.78, pegged to 1SD above 5-year historical average P/E multiple of 16.2x (see Figure #4) reflecting its solid exponential growth ahead.

Source: Hong Leong Investment Bank Research- 22 Aug 2014