Results

• 1Q16 sales of RM56.0m was translated into a core net profit of RM17.3m which came in above expectations, accounting for 38% and 29% of HLIB and consensus full year estimates, respectively.

Deviations

• Higher-than-expected sales in a seasonally weak quarter.

Dividend

• None. (1Q15: none).

Highlights

• Strongest 1Q ever where 1Q16 revenue of RM56.0m (+16.6% qoq and +68.5% yoy) came in stronger than guidance of circa RM51.5m in the last analyst briefing.

• Sales from all product segments grew in 1Q16 led by MVS with 148% yoy, followed by ABI and ECS with 39% yoy and 26% yoy, respectively.

• Sequential revenue growth was also assisted by all product segments with MVS, ABI and ECS increased 26%, 10% and 32%, respectively.

• One-off tax refund of RM5.5m associated with pioneer status in 2H15 was recognized.

• ViTrox is optimistic on the business prospect in FY16 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 tax treatment under the new pioneer status.

Comments

• SEMI’s Apr 2016 preliminary semiconductor equipment industry’s book-to-bill ratio was 1.10, 5th consecutive months with reading above parity.

• 3 mohth average of worldwide bookings in Apr 2016 was USD1.59bn (15.6% mom and 1.3% yoy). While, 3 mohth average of worldwide billings in Apr 2016 was USD1.46bn (21.5% mom and -4.0% yoy).

• SEMI believes that the data reflect strong investments in 3D NAND and China.

Risks

• FOREX, downturn in semiconductor demand and equipment spending, labour shortage, patent infringement and technology imitation.

Forecasts

• Unchanged pending analyst briefing.

Rating

• Under Review

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

• Our HOLD call and TP of RM3.16 are under review with upward bias pending analyst briefing. Our fair value is pegged to 1SD above 5-year historical average P/E multiple of 16.0x of FY16 EPS.

Source: Hong Leong Investment Bank Research - 26 May 2016