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VITROX–Fundamental Analysis (6 Dec 2013) - L. C. Chong

Tan KW
Publish date: Fri, 06 Dec 2013, 05:41 PM
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Posted by L. C. Chong on December 6, 2013

VITROX Analysis – http://lcchong.files.wordpress.com/2013/12/vitrox-q3-2013.xlsx

Latest Financial – Q3 2014 Financial Report (21 Nov 2013) http://www.bursamalaysia.com/market/listed-companies/company-announcements/1468417

At the time of writing, I did not own shares of VITROX.

 

http://lcchong.wordpress.com/2013/12/06/vitroxfundamental-analysis-6-dec-2013/

 

 

 

Sep-13 Performance
 
Slightly stronger-than-expected 9M13 top line of RM77.6m was translated into a core net profit of RM18.8m, which is within expectation as it accounted for 71.7% of HLIB full year estimate.



In 3Q13, ViTrox registered revenue of RM36.3m (+52.4% yoy, +28.0% qoq), EBITDA of RM11.8m (>+100% yoy, >+100% qoq), and normalized PATAMI of RM11.9m (>+100% yoy, +83% qoq).



3Q13 revenue gained strongly on the back of demand surge for ABI products which expanded 105% yoy and 98% qoq. The increase was mainly due to significant increase in sales recorded for Advanced X-ray Inspection (AXI) System.



Top line growth has spurred 3Q13 EBITDA margins to improve significantly by 17.1-ppt yoy and 12.5-ppt qoq to 32.5%.



The improved performance has led ViTrox to believe that the demand for their products will be sustainable for the remaining of the year. ViTrox will continue to focus on market expansion activities, customer relationship building, product innovation and prudent cost management.


 

 

Comments
   

Profitability
   
  Except 2009 and 2011, all of VITROX's profitability ratios are above my benchmark.

  - In 2009, the decrease of revenue was attributed to adverse economic situation.

  - In 2011, lower owner eanings was attributed to high capex.

- Revenue growth is acceptable, but net profit dropped in the past 2 years due to higher operating expenses.
   

Financial Health
   
  - Very low leverage.

- Higher Cash Conversion Cycle was contributed by higher days in inventory.

  - VITROX has higher level in raw material and Work-in-progress.

  - I think that due its business nature, consumption of inventories may not fast enough. That's why they need to allocate allowance for slow moving inventories.

- Operating cash and owner earnings are not consistently growing because of high capex and higher operating expenses in the past 2 years.

- In overall, their cash position is healthy.
   

Growth Drivers
   
  - In 2013, VITROX successfully expanded our presence to new territories include Japan, Europe, South America and East America, India and Indonesia through our sales team and local channel partners.

- The new products namely V510G2, V810, TH1000S and TR1000S have been well accepted by many new major customers around the world, where 30% of revenue was contributed from new customers acquired in the past 2 years.

- High commitment in developing and launching new product:

  - Examples:

    1. High-speed vision systems supporting turret (rotary)-based test handlers, with throughput up to 60KUPH, comprising integrated vision systems capable of inspecting mark, lead and package related defects concurrently.

    2. Launch of new high speed Tray inspection handler (TH1000S) and Tray to Tape & Reel inspection handler (TR1000S). Both new models will come with enhanced inspection features to handle new IC packages, higher throughput and better ease of use functionalities.

    3. Enhanced inspection functions (for Tray Handler) include OCR (optical character recognition) capability and also POP (package on package) 3D inspection using advanced optical setup and software algorithms.

    4. 3D Phase shift Profilometry AOI system and side marking inspection capability.

    5. Release of enhanced AXI platform with multiple form factors that tailors to the need of emerging market such as automotive, smart phone and tablet.

  - VITROX strong R&D team who are committed to launch at least three innovative products (one for each business unit) every 6 months continue to strengthen their leading position in semiconductor component inspection, 3D Tray IC inspection, AOI inspection and 3D X-ray inspection.

  - In 2012, VITROX successfully filed 5 patents and 1 copyright for our AOI and AXI products.

- Great efforts in continuously enhancing operations:

  - Established the manufacturing facilities for the newly launched second generation Advanced Optical Inspection systems (V510G2), Tray based vision inspection handler (TH1000S) and Tray to Tape & Reel vision inspection handler (TR1000S) flawlessly upon release.

  - Doubled the manufacturing capabilities of AOI and AXI to support business needs.

  - Successfully developed comprehensive order fulfillment system to optimize inventory purchases while meeting manufacturing built demand.

  - Expanding supplier base through strategic supplier management processes.

  - Established a centralized quality assurance function to achieve best in class quality in our incoming and outgoing products.

- ViTrox has growth potential in the ABI segment with the exit of Agilent from this market.
   

Risks/Challenges
   
  - FOREX, downturn in semiconductor demand and equipment spending, patent infringement, technology imitation.

- ViTrox operates in a highly competitive market and prone to rapid advances in technology.
   

Valuation
   
  - Fair values from different models:

  - DCF (5-Y) - 1.48 - 1.67

  - EY% - 1.69 - 1.82

  - Absolute PE - 1.83

- I think it is fair enough to value VITROX from 1.5 to 1.8, which I enjoy 20% to 34% MOS.
   

Strategy
   
  - Since VITROX is now undervalued, I will wait for correction or consolidation to accumulate VITROX.

- It has been shooting up since end of Oct 2013.

- I missed the boat....
   

 

 

VITROX (0097)
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Discussions
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ckleow79

THIS SHARE WAS INTRODUCED DURING THE INVESTOR DAY WHICH ORGANISED BY I capital BERHAD. I WAS SHOCK Y mR TAN choose vitrox. Suria and wellcall were given a presentation in that day too. after that, the share run high and high and higher.
if u attended the investor day. surely u will buy suria, vitrox and wellcall. now u can gain more than 30% gain on portfolio.

2013-12-07 02:12

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