Results

• 1H16 sales of RM112.7m was translated into a core net profit of RM30.0m which came in above expectations, accounting for 58.4% of HLIB’s full year estimates, but in line with consensus (48.2%).

Deviations

• Higher-than-expected sales.

Dividend

• None. (2Q15: none).

Highlights

• YoY: 2Q16 revenue grew 45.6% to RM56.6m due to higher demand for MVS and ABI products which surged 86% and 34% respectively. This is also partly aided by the stronger USD against RM.

• QoQ: 2Q16 top line was rather flat with 1.1% expansion as the seasonal strength over 1Q16 was not observed. While margin improved thanks to the stronger greenback, PAT was lower by 7.6% chiefly due to the one-off tax refund amounted to RM5.5m in 1Q16.

• 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 Jun 2016 preliminary semiconductor equipment industry’s book-to-bill ratio was 1.00, 7th consecutive months with reading above parity.

• 3 month average of worldwide bookings in Jun 2016 was USD1.71bn (-2.1% mom and +12.9% yoy). While, 3 month average of worldwide billings in Jun 2016 was USD1.71bn (+7.0% mom and +10.2% yoy).

• SEMI commented that although order activity slowed for the most recent month, billing activities are at their highest level since Feb 2011.

Risks

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

Forecasts

• Unchanged pending analyst briefing.

Rating

HOLD, TP: RM3.50

• 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

• Reiterate HOLD with unchanged TP of RM3.50 with upward biased, pending analyst briefing today.
• Our TP is pegged to P/E multiple of 16.0x of FY16 EPS.

Source: Hong Leong Investment Bank Research - 19 Aug 2016