Results

• 9M14  top  line  of  RM127.4m  was  translated  into  higher-thanexpected  core net profit of RM35.4m,  accounted  for  84.6%  of HLIB full year  estimate.

Deviations

• Revenue  mix  due  to  sustainable  highest-margin-MVS  sales continues to outpace  ABI and ECS.

Dividend

• The  board  has  approved  an  interim  tax -exempt  dividend  of 2.0  sen  per  share  (9M12:  1.0  sen). However, the entitlement and  payment  dates  have  yet  to  be  finalized  and  will  be furnished  at a later date.

Highlights

The  sequential  slowdown  is  very  much  guided  and  expected mainly due to industry’s seasonality.

Even  so,  3Q14  revenue  of  RM39.5m  (+8.8%  yoy)  is  another remarkable  milestone  as  the  second  highest  quarterly  sales in  its  history.   This is mainly thanks to the strong MVS s ales which grew 113% yoy.

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

Although  SEMI’s   Sept  preliminary  semiconductor  equipment industry’s  book -to-bill  ratio  recorded  the  first  dip below parity since  Sept  2013  to  0.94,  we  are  not  overly  concern  and attributing it to seasonality effect.

Gartner  expects  global  semiconductor capital spending to be robust in 2015, growing  11.3% yoy  to reach  USD43.6bn.

China’s  enormous  investment  (Rmb1tr)  into  semiconduc tor industry  may  lead  to  potential  multi-year  high  demand  of ViTrox’s products.

Incentives  in  the  form  of  capital  allowance  on  automation expenditure  to  encourage  automation  in  the  manufacturing sector  as  tabled  in  Budget  2015 would also spur demand  for its  products.

Risks

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

Forecasts

• Unchanged  pending  analyst briefing.

Rating

BUY, TP: RM3.17

Positives

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

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  RM3.17,  pegged  to 1SD  above  5-year  historical  average  P/E  multiple  of  16.2x

Source: Hong Leong Investment Bank Research - 21 Nov 2014