Results

• 9M16 sales of RM170.3m was translated into a core net profit of RM42.3m which came in above expectations, accounting for 83.3% of HLIB’s full year estimates, but in line with consensus (75.1%).

Deviations

• Higher-than-expected sales.

Dividend

• Approved an interim tax-exempt dividend of 2.5 sen per share (3Q15: none), pending entitlement and payment dates.

Highlights

• YoY: 3Q16 revenue grew 43.9% to RM57.6m due to higher demand for all product lines where MVS, ABI and ECS surged 32%, 53% and 22% respectively. Excluding FOREX, core profit was much stronger due to the expiry of pioneer status tax incentive in 3Q15.

• QoQ: 3Q16 top line was rather flat with 1.8% expansion and this was filtered down to bottom line, partly aided by lower effective tax rate.

• YTD: revenue increased by 51.8% thanks to higher demand in all product portfolios. Excluding one-off in FOREX and tax, core earnings surged mainly due to economy of scale.

• 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 Sept 2016 preliminary semiconductor equipment industry’s book-to-bill ratio was 1.05, 10 th consecutive months with reading above parity.

• 3 month average of worldwide bookings in Sep 2016 was USD1.6bn (-8.5% mom and +3.2% yoy). While, 3 month average of worldwide billings in Jun 2016 was USD1.5bn (- 10.2% mom and +2.6% yoy).

• SEMI commented that bookings continue to outpace billings and YTD data are on trend to surpass last year’s levels.

Risks

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

Forecasts

• Unchanged pending analyst briefing.

Rating

HOLD ↔ , TP: RM3.50 ↔

• ViTrox is poised to win more market share in the advent of global semiconductor growth leveraging on its technology leadership in machine inspection, especially in 3D-AOI and AXI. A beneficiary of stronger USD also. However, MVS-S sales are highly dependent on single customer and majority of sales are non-recurring.

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 - 18 Nov 2016