Results

• 1Q15 top line of RM33.3m was translated into a core net profit of RM6.1m, accounting for 12.1% and 10.7% of HLIB and consensus full year estimates, respectively.

• However, we regards this to be within expectations as 1Q is seasonally the weakest historically (1Q14 core net profit of RM4.0m accounted for 9.1% of FY14).

Deviations

• In line.

Dividend

• Proposed tax-exempt special and final dividend of 3.5 sen and 0.5 sen per share, respectively for FYE14 to be approved at the forthcoming AGM. The entitlement and payment dates have yet to be finalized.

Highlights

• As guided, 1Q15 top line grew 45.7% yoy to RM33.3m thanks to ABI sales which surged 96% yoy. However, sales contracted sequentially by 21.7% as both MVS and ABI’s contribution fell by 36% qoq and 15% qoq, respectively. This is in tandem with the seasonally weaker semiconductor equipment spending.

• 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 and the progress in pioneer status renewal.

Comments

• SEMI’s March 2015 preliminary semiconductor equipment industry’s book-to-bill ratio topped 1.10, after staying above parity for three consecutive months.

• 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: RM3.80

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 2DAOI market and prone to rapid advances in technology.

Valuation

• Maintain BUY although there is less than 10% upside from our unchanged TP of RM3.80 pending analyst briefing. Our fair value is pegged to 1SD above 5-year historical average P/E multiple of 16.2x of FY16 EPS (see Figure #4).

Source: Hong Leong Investment Bank Research - 22 May 2015