Highlights

• After 3 consecutive sales record years, ViTrox targets to scale new height in FY15 with revenue ranging from RM170m to RM208m, representing flat to 22.3% yoy growth.

• MVS-S: resilient 4Q14 order despite seasonality weakness (+120.8.0% yoy and -19.6% qoq) thanks to its major client, SRM who is also riding high on the industry turnaround wave. Order backlog normalized to 168 vs. 269 systems in 4Q14. 1Q15 revenue is forecasted to be ranging RM5-7m. Demand is expected to pick up from 2Q15 onwards.

• MVS-T: FY14 sales more than doubled (+149%) yoy thanks to booming smart devices and 4G / LTE. Expects to deliver 8- 10 units in 1Q15 vs. 7 in 4Q14. Order book maintained at 5 units to be delivered over the next 2 months. Slowdown in order backlog is attributed to seasonal factors. 1Q15 sales expected to be between RM6-8m (+59.5% to +112.7% yoy).

• ABI: 4Q14 surged by 35% yoy and 50% qoq although PCB contribution remains small. Outlook is exceptionally good in 1H15 with order backlog increased to RM11.7m with PO valued at RM19m. 1Q15 revenue forecast is estimated to be more than RM21m (+75.7% yoy). Strong funnel was driven by bulk orders from a few tier-1 CM from China, Malaysia, USA and Mexico as well as new OEM and ODM account wins.

• By summing the mid/min-points of those guidance, 1Q15 sales could potentially grow 49% yoy to RM34m.

• Construction of Campus 2.0 Phase 1 (300k sqft floor space) on the newly acquired Batu Kawan land will commence early 2H15 and to complete by early 2017. CAPEX involved is estimated to be RM50-60m to be partly funded by borrowings.

• Pioneer status which grants tax exemptions will end in 1Q15. ViTrox is in the midst of extending it and confident of obtaining favorable results. Failing which, it will be subject to 22% corporate tax rate but expect this to be partly cushioned by government grants.

Risks

• Failure in pioneer status renewal, FOREX, downturn in semiconductor demand and equipment spending, patent infringement and technology imitation.

Forecasts

• Tweaked model based on new guidance and operational data. In turn, this has led to upward revisions of FY15-16 EPS by 11.2% and 5.8%, respectively.

Rating

BUY , TP: RM3.80

• 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 after raising our TP by 19.9% from RM3.17 to RM3.80 as we rolled over our valuation to FY16. Our TP is pegged to 1SD above 5-year historical average P/E multiple of 16.0x of FY16 EPS (see Figure #2).

Source: Hong Leong Investment Bank Research - 27 Feb 2015