Highlights

Again, achieved new highs in revenue and profit merely with 9 months results. With 4Q14 expected to match 3Q14, FY14 top line is forecasted to reach ~RM165m, representing a remarkable growth of 55.7% yoy.

MVS-S: resilient 3Q14 order despite seasonality weakness (+57.0% yoy and -8.1% qoq) thanks to its major client, SRM who is also riding high on the industry turnaround wave. Order backlog normalized to 269 vs. 376 systems in 3Q14. 4Q14 revenue is forecasted to be ranging RM9-10m. Demand is expected to pick up from 2Q15 onwards.

MVS-T: YTD 9M14 sales more than doubled (+173.7%) yoy with 56 machines (more than total deliveries in FY10-13 combined) and has surpassed the delivery of 100 th machine just within 3 years since its introduc tion. Expects to deliver 9-10 units in 4Q14 vs. 18-20 in 3Q14. Order book declined to 5 from 15 units in 3Q14, to be delivered over the next 2 months. 4Q14 sales expected to be between RM6-8m.

ABI: 3Q14 fell by 33% yoy and 40% qoq dragged by disappointment in PCB. Resources will be reallocated to PCA. Outlook remains positive with order backlog increased from RM1m in 2Q14 to RM3.9m in 3Q14. Strong funnel driven by:

1. Obsolescence of ~800 Agilent machines in the market requiring replacement;

2. Business model transformation by ODM to develop higher value-add products led to higher adoption of AXI; and

3. Expansion of top EMS to support new market segments including mobile phone, medical and telecommunication. 4Q14 revenue forecast is estimated to be RM20m while carry forward backlog into 1Q15 will be higher than in 2H14.

By summing the mid-points of those guidance, 4Q14 sales could potentially grow 30.4% yoy to RM36.5m, matching our FY forecast.

Pioneer status which grants tax exemptions will end in 1Q15. ViTrox is in the midst of extending it and confident of obtaining favorable results.

Risks

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

Forecasts

• Unchanged.

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 2D-AOI 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 - 24 Nov 2014