Results

• 9M17 sales of RM232m was translated into a core net profit of RM62m which came in within expectations, accounting for 78% and 76% of HLIB and consensus full year forecasts, respectively.

Deviations

• In line.

Dividend

• Approved an interim tax-exempt dividend of 1.50 (3Q16: 1.25 post-bonus issue) sen per share, pending entitlement and payment dates.

Highlights

• Another record breaking quarter with both revenue and core earnings achieved new highs at RM84m and RM23m, respectively. While 4Q17 is expected to sustain at this level, challenges remain in terms of raw material sourcing, floor space constraint, seasonal closure and relocation to new Batu Kawan Campus 2.0.
• QoQ: Revenue grew 9% to RM84m thanks to higher contributions from ABI and MVS. Core PAT gained 22% on the back of margin expansion thanks to economies of scale.
• YoY: Turnover grew 47% thanks to higher demand for MVS and ABI which grew 30% and 55%, respectively. The increase was supported by stronger demand from expanded customer base and positive product acceptances. Core PAT gained 80% attributable to improved economies of scale.
• YTD: Top and bottom lines expanded 36% and 46%, respectively for the same explanation above. Recall that 9M16 saw a one-time tax refund amounted to RM5.5m associated with the renewal of pioneer status in prior year.
• Analyst briefing will be hosted this morning which we expect to grasp better understanding of the company outlook.

Comments

• SEMI posted US$2bn in billings worldwide in Sep 2017 (3- month average basis), down 7% mom but up 36% 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

HOLD ↔ , 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 HOLD 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 - 17 Nov 2017