Results

• 1H15 sales of RM72.2m was translated into a core net profit of RM14.3m which came below expectations, accounting for 28.2% and 25.1% of HLIB and consensus full year estimates, respectively.

Deviations

• Weaker-than-expected revenue and higher effective corporate tax rate upon expiry of pioneer status.

Dividend

• None. (2Q14: none).

Highlights

• While 2Q15 top line matched guidance, the disappointment was a result of the expectation for the repeat of MVS-T order windfall which did not materialize.

• 2Q15 top line fell 40.2% yoy to RM38.9m due to weaker demands for MVS and ECS which were down by 71% and 23% yoy, respectively. However, sales gained sequentially by 17.0% thanks to higher sales from MVS, ABI and ECS which recorded 14%, 16% and 73% qoq growth, 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 and the progress in pioneer status renewal.

Comments

• SEMI’s June 2015 preliminary semiconductor equipment industry’s book-to-bill ratio was 0.98, the second consecutive month with reading below parity.

• 3-mohth average of worldwide bookings in June 2015 was USD1.51bn (-2.6% mom and +3.5% yoy). While, 3-mohth average of worldwide billings in June 2015 was USD1.54bn (-1.0% mom and +16.2% yoy).

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

Risks

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

Forecasts

• Unchanged pending analyst briefing.

Rating

HOLD , 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 HOLD with unchanged TP of RM3.80 pending analyst briefing. Our fair value is pegged to 1SD above 5- year historical average P/E multiple of 16.0x of FY16 EPS (see Figure #5).

Source: Hong Leong Investment Bank Research - 21 Aug 2015