Highlights

• Based on the guidance provided in the last analyst briefing, 1Q15 sales could potentially grow 49% yoy to RM34m, the strongest 1Q ever.

• 1Q15 revenue forecast breakdown based on products are MVS-S with RM5-7m, MVS-T with RM6-8m and ABI to be more than RM21m.

• 2Q is traditionally the strongest due to seasonality in global semiconductor equipment spending. For 2Q15, we expect it to operate at full capacity at similar level to 2Q14 with a target of circa RM65m sales. In turn, ViTrox will probably close 1H15 with RM100m sales, about 50% of HLIB’s forecast.

• Pioneer status which grants tax exemptions ended in 1Q15 and yet to be renewed. As such, we expect both 2Q15 and 3Q15 to be levied at normal corporate tax rate while renewal should be achieved in 4Q15.

• Worst case scenario: 22% effective tax rate for 2Q15 and 3Q15 as pioneer status renewed in 4Q15. By assuming equal quarterly sales, FY15 total tax impact is forecasted at circa RM7m.

• Best case scenario: 22% effective tax rate for 2Q15 and 3Q15 whilst pioneer status renewed in 4Q15 and allowed to be backdated for 3Q15. By assuming equal quarterly sales, FY15 total tax impact is forecasted at circa RM4m.

• Both scenarios above have yet to take into the consideration of government grants which the management expect to cushion the tax impact.

• In its recent outlook report, SEMI stated that initial monthly for silicon shipments and semiconductor equipment are proving to be encouraging. Give the current CAPEX announcements, the outlook for semiconductor equipment is optimistic as well, with current projections of the equipment market showing another year of growth, which would place the equipment market on par with the last market high set in 2011.

Risks

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

Forecasts

• Maintained pending further management guidance.

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 with unchanged TP of RM3.80 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 - 15 Apr 2015