Results

• FY17 sales of RM304m translated into a core net profit of RM85m which came in within expectations, accounting for 104% of HLIB and street’s full year forecasts, respectively.

Deviations

• In line.

Dividend

• None (4Q16: none). YTD amounted to 1.50 sen (FY16: 3.25 sen) per share pending final dividend which is usually distributed later.

Highlights

• Another record breaking quarter with both revenue and core earnings achieving new highs at RM96m and RM23m, respectively. 1Q18 is expected to experience the usual seasonal weakness coupled with challenges in raw material sourcing, floor space constraint, seasonal closure and relocation to new Batu Kawan Campus 2.0.
• QoQ: Revenue grew 14% to RM96m thanks to higher contributions from ABI and MVS. However, core PAT only gained 2% to RM23m as margin narrowed which may due to higher raw material costs and weaker US$.
• YoY: Turnover grew 51% thanks to higher demand for MVS and ABI which grew 115% and 27%, respectively. The increase was supported by stronger demand from expanded customer base and positive product acceptances. Core PAT gained 42% attributable to improved economies of scale.
• YTD: Top and bottom lines expanded 40% and 45%, respectively for the same explanation above. Recall that FY16 saw a one-time tax refund amounting to RM5.5m associated with the renewal of pioneer status in prior year.
• Unit shipment for 4Q17: MVS-S (435 units), MVS-T (24 units), AOI (32 units), AXI (26 units) and ECS (1,962 units).
• Analyst briefing will be hosted this morning which we expect to grasp a better understanding of the company outlook.

Comments

• SEMI posted US$2.4bn in billings worldwide in Dec 2017 (3- month average basis), upped 16% MoM and 28% YoY.
• According to SEMI’s Dec 2017 report, global semiconductor equipment market is poised to stage a robust performance in 2018 with a YoY increase of 7.5% to reach US$60.1bn, another record breaking year.

Risks

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

Forecasts

• Unchanged.

Rating

HOLD ↔ , TP: RM5.85 ↔

• 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. 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 RM5.85, pegged to P/E multiple of 22x of FY19 EPS.

Source: Hong Leong Investment Bank Research - 23 Feb 2018