Highlights

Likely to achieve another record breaking year after the extraordinary 2Q14 results. ViTrox remains upbeat on global semiconductor outlook and confident on strong growth in 2H14, but not to the quantum of previous quarter.

MVS-S: orders revived by 140% yoy and 83% qoq thanks to its major client, SRM who is also riding high on the industry turnaround wave. Order backlog increased to 376 from 326 systems in 2Q14 as demand continue to pile. 3Q14 revenue is forecasted to be ranging RM9-10m.

MVS-T: 2Q14 main sales growth driver (+143% yoy and +542% qoq) as production lead-time was shorten significantly to 12 weeks after facility upgrade. Expects to deliver 18-20 units in 3Q14 vs. 30-35 in 2Q14. Order book declined to 15 from 23 units in 2Q14, to be delivered over the next 2 months. Added 3 new OSAT and OEM customers from Taiwan and Malaysia. 3Q14 sales expected to be between RM10-12m.

ABI (AOI and AXI): accounted for 43% of 2Q14’s turnover, the largest contributor after expanding 117% yoy and 136% qoq. Outlook is positive driven by:

1. Lead conversion to POs from product qualifications;

2. Won >10 accounts from Taiwan and US CM and EMS;

3. New EMS facility in Chengdu with 20 AOI and AXI opportunities in the next 6 months; and

4. New orders from sales channel partner added this year. 3Q14 revenue forecast is estimated to be RM15-18m.

By summing the mid-points of those forecasts, 3Q14 sales could potentially match or grow marginally yoy to RM37m. Still remarkable as 3Q13 results was the second highest quarterly results in its history.

Risks

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

Forecasts

Tweaked revenue forecast and mix. As a result, FY14-16 EPS were revised upward by 19.3%, 6.8% and 7.4%, respectively.

Rating

HOLD, TP: RM2.95

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 2D-AOI market and prone to rapid advances in technology.

Valuation

Downgrade from BUY to HOLD as share price has more than doubled since our last upgrade, pricing in its superb trajectory growth. Our fair value is raised by 6.1% from RM2.78 to RM2.95 reflecting earnings revision. TP is pegged to 1SD above 5-year historical average P/E multiple of 16.2x (see Figure #1).

Source: Hong Leong Investment Bank Research - 25 Aug 2014