Results

• 1H17 sales of RM147.2m was translated into a core net profit of RM39.1m which came in within expectations, accounting for 49% of HLIB and consensus full year forecasts, respectively.

Deviations

• In line.

Dividend

• None (2Q16: none).

Highlights

• Back-to-back record breaking streak with 2Q17 revenue achieved another new high at RM77.6m superseding 1Q17’s RM69.6m. We think ViTrox may go from strength to strength considering that 3Q17 is a seasonally strong quarter.
• QoQ: Revenue grew 12% to RM77.6m thanks to higher contributions from ABI and MVS-S. However, core PAT fell by 9% on the back of slight margin compressions.
• YoY: Turnover grew 37% thanks to higher demand for MVS and ABI which grew 45% and 31%, respectively. The increase was supported by stronger demand from expanded customer base and positive product acceptances. Core net profit gained 50% attributable to improved economies of scale and higher grant income.
• YTD: Top and bottom lines expanded 31% and 32%, respectively for the same explanation above. Recall that 1H16 saw a one-time tax refund amounted to RM5.5m associated with the renewal of pioneer status in prior year.
• ViTrox is optimistic on the business prospect in FY17 with focus on market expansion activities, customer relationship building and product innovation. Also, it has taken steps to minimize its net monetary assets in order to mitigate the financial impacts arising from currency fluctuation.
• Analyst briefing will be hosted this morning which we expect to grasp better understanding of the company outlook.

Comments

• SEMI posted US$2.3bn in billings worldwide in May 2017 (3- month average basis), up 6.4% mom and 41.9% yoy.
• According to SEMI’s latest forecasts, worldwide sales of new semiconductor manufacturing equipment is expected to grow 19.8% to US$49.4bn in 2017, exceeding the market high of US$47.7bn set in 2000. It will grow by another 7.7% in 2018 to US$53.2bn resulting in another record-breaking year.

Risks

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

Forecasts

• Unchanged.

Rating

BUY ↔ , TP: RM4.54 ↔

• 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

• Maintain BUY pending analyst briefing with unchanged TP of RM4.54, pegged to P/E multiple of 20x of FY18 EPS, in line with global peers’ average .

Source: Hong Leong Investment Bank Research - 18 Aug 2017