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Tuesday, February 28, 2017

ViTrox Corp - 4Q16 Analyst Briefing

Author: HLInvest   |   Publish date: Tue, 28 Feb 2017, 10:52 AM 


    Highlights

    • Left the briefing on a high note as it is gathering momentum into 1Q17 and strives to beat record high revenue achieved in 2Q14, after 4Q16 outperformed its own guidance by 27%
    • MVS-S: 4Q16 sales grew 7% yoy and contributed 17% of overall sales. Order forecast for FY17 remains strong with potential sale of 3-5 wafer vision inspection solutions. Order backlog fell marginally to 224 (2 months lead-time) from 232 systems in 4Q16, but higher than 1Q16’s 200 units. 1Q17 sales is forecasted to be RM9-10m (-5% qoq and +66% yoy).
    • MVS-T: 4Q16 sales fell 28% qoq and 9% yoy, accounted for 11% of overall sales. Expect to deliver 9-12 units in 1Q17 vs. 5 in 4Q16. Order book is forecasted at 6-8 machines in the next 3 months with improved demand in 1Q17. 1Q17 sales projected to be ranging RM10-12m (+63% qoq and +48% yoy). Special focus in China through engaging new SCPs and direct hiring to improve customer coverage, market share and response rate. ViTrox is also engaging end users for joint product inspection development to be ahead and defend market share.
    • ABI: Sales surged by 25% qoq and 51% yoy to account for 70% of 4Q16 turnover. 1H17 is expected to be solid with strong funnel and opportunities from both new and existing customers. Backlog as of early Feb was more than RM26m. 1Q17 revenue is forecasted at RM40-45m (-5% qoq and +44% yoy). Experiencing overwhelmed 3D AOI evaluations with high volume order prospects from customers in China. Orders continues to be strong supported by the 5DX replacement plan and new line set up in top EMS involved in electric car and telecommunication markets.
    • By summing the mid-points of guidance above and assuming flat sequential growth in ECS, 1Q17 sales could potentially expand 15% yoy and 1% qoq to RM64m. This is laudable given that 1Q is traditionally a weaker due to seasonality.
    • ViTrox’s book-to-bill ratio remains healthy at 1.11 in Dec 16.

    Risks

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

    Forecasts

    • Modify our sales assumptions based on latest guidance while tweaking gross margins taking into consideration of stronger USD. In turn, FY17-18 EPS forecasts are raised by 9.4% and 7.2%, respectively.

    Rating

    BUY , TP: RM4.71 
    • 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

    • Upgrade from HOLD to BUY after raising our TP by 21% from RM3.90 to RM4.71 after rolling forward our valuation to FY18, pegged to P/E multiple of 15x (previously 16x) in line with global peers’ average .
    Source: Hong Leong Investment Bank Research - 28 Feb 2017

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