Results

• FY14 top line of RM169.9m was translated into much anticipated core net profit of RM43.8m, accounted for 104.9% and 97.6% of HLIB and consensus full year estimates, respectively.

Deviations

• -

Dividend

• Declared and paid an interim tax exempt dividend of 2 sen per share on 22 Jan 2015. YTD dividend amounted to 4.0 sen per share (FY13: 2.25 sen).

Highlights

• Higher-than-guided 4Q14 top line growth of 7.6% qoq to RM42.5m thanks to ABI sales which strengthened 61% qoq. This is the second highest quarterly sales in its history. However, EBITDA margin was lower by 6.7-ppt mainly due to revenue mix as ABI growth outpaced higher-margin MVS.

• 4Q14 revenue also grew remarkably by 49% yoy as MVS, ABI and ECS sales expanded by 89%, 35% and 19%, respectively.

• In view of positive market outlooks in the semiconductor and electronics industries, ViTrox is optimistic on the growth prospect in FY15 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 Dec preliminary semiconductor equipment industry’s book-to-bill ratio is slightly below parity of 0.98, we are not overly concern and attributing it to seasonality effect.

• SEMI believes that equipment spending is forecast to remain on track for annual growth given the current expectations for the overall semiconductor industry.

• Gartner expects wafer-level packaging and assembly equipment to grow 8.9% yoy to USD1.9bn in 2015.

• China’s enormous investment (Rmb1tr) into semiconductor industry may lead to potential multi-year high demand of ViTrox’s 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

• Maintain BUY although there is less than 10% upside from our unchanged TP of RM3.17, pending analyst briefing with upward biased. Our fair value is pegged to 1SD above 5- year historical average P/E multiple of 16.2x of FY15 EPS (see Figure #5).

Source: Hong Leong Investment Bank Research - 26 Feb 2015