Results

• FY16 sales of RM234m was translated into a core net profit of RM58.6m which came in above expectations, accounting for 111% of HLIB?s full year estimates, but in line with consensus (104%).

Deviations

• Higher-than-expected sales.

Dividend

• None (4Q15: none). YTD dividend amounted to 2.5 sen (YTD15: 1.5 sen) per share.

Highlights

• QoQ: Revenue grew 11% thanks to higher contribution from ABI, but this was partially offset by MVS? decline. Core PAT expanded 29% on the back of improved economy of scale.
• YoY: 4Q16 revenue grew 32% to RM64m due to higher demand for ABI which grew 51%. Excluding FOREX, core profit improved 69% due to low base effect (expiry of pioneer status tax incentive in 4Q15).
• FY16: Revenue increased by 46% thanks to higher demand in all product portfolios. Excluding one-off in FOREX and tax, core earnings almost doubled mainly due to improved economy of scale.
• ViTrox is optimistic on the business prospect in FY17 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 Dec 2016 preliminary semiconductor equipment industry?s book-to-bill ratio was 1.06.
• 3 month average of worldwide bookings in Dec 2016 was USD2bn (+28% mom and +48% yoy). While, 3 month average of worldwide billings in Dec 2016 was USD1.9bn (+16% mom and +38% yoy).
• According to SEMI?s Sep 2016 report, global semiconductor equipment market is poised to stage a robust rebound in 2017 with a yoy increase of 9.6% to reach US$41.5bn. Spending growth will continue in 2017 driven by foundries (both 3D NAND and DRAM), MPU, power and investments in China.

Risks

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

Forecasts

• Unchanged pending analyst briefing.

Rating

HOLD ↔, TP: RM3.90 ↔

• 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 RM3.90 with upward biased, pending analyst briefing today. Our TP is pegged to P/E multiple of 16x of FY17 EPS.

Source: Hong Leong Investment Bank Research - 27 Feb 2017