VITROX Updates – 23 Jul 2017

VITROX Analysis File – http://wp.me/a17Hxk-2Iw

I sold off my VITROX shares in May 2015 at around 3.6-3.7 as I didn’t expect 46% revenue growth in FY16. As of 14 Jul 2017, VITROX share price was at 7.78 (before issue bonus 1:1). Hindsight is always 20/20, so I won’t regret my action.

Moving forward, I still bet on good growth drivers in VITROX business as Global Sales Report 2017 by World Semiconductor Trade Statistics shows positive outlook in the Semiconductor industry. The uptrend market outlook in the semiconductor and electronics assembly manufacturing sectors in the next 2-3 years coupled with ViTrox’s strong line-up of innovative, advanced and cost effective machine vision inspection products, and dedicated sales channel partners worldwide, ViTrox is well positioned to capture bigger market shares in both sectors in the next few years.

To be conservative, I don’t project 30%-50% revenue growth in VITROX business, but approx. +17% and +6% growth rate for FY17 and FY18 respectively. With this assumption, fair value of VITROX range from 7.1 to 8.1 (after 1:1 bonus issue, around 3.3 to 4.05). In my opinion, as of 21 Jul 2017, at RM4.00, I believe investors has already factored in its growth drivers. Thus, VITROX is fully valued.

Join my FB group: https://www.facebook.com/groups/285121298359919 for more collaboration.

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VITROX–Fundamental Analysis (4 Sep 2015)

VITROX Analysis:-

Excel – http://1drv.ms/1EEY9bz

My View:-

  • Valuation:
    • Absolute EY%:
      • Trailing:
        • FY14 (EPS: 0.211) – 2.665 (Uncertainty Risk: HIGH)
        • R4Q (EPS: 0.191) – 2.405 (Uncertainty Risk: VERY HIGH)
      • Forward:
        • FY15 (EPS: 0.198 ± 5%) – From 2.370 to 2.619 (Uncertainty Risk: VERY HIGH)
        • FY16 (EPS: 0.224 ± 5%) – From 2.687 to 2.970 (Uncertainty Risk: HIGH)
      • EPS applied to reach the current stock price (2.9): 0.230
  • 9 Apr 2015 – Order backlog remains strong at MYR24m as at mid-Aug and book-to-bill ratio recovered to a healthy 1.1x as at end-Jul.
  • Strong orders were seen at the ABI division in 1H15 as clients, mainly EMS companies, ramped up to support the expansion in the Internet of things (IoTs). However, we also cut FY15 ABI unit sales by 21% to account for the delay of the launch of its mass-market mini AXI, low-cost 3D AOI to 4Q15 (from 3Q15).
  • I recognize that my valuation is not as compelling as what suggested by Maybank and Hong Leong analysts. To reach target price suggested by them, they assumed that EY% of VITROX can drop to around 5%. Looking at historical EY% band, the average of low EY% is 7.9%, and in 2011, VITROX’s EY% was at 5% level for few months.
    • Of course, we can always argue that “past performance is not an indicator of future results”.
    • In my opinion, the recent price performance of VITROX already factored in the future potential earnings.

Latest Financial – Q2 2015 Financial Report (20 Aug 2015) http://www.bursamalaysia.com/market/listed-companies/company-announcements/4834325

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

VITROX – Fundamental Analysis (23 May 2015)

VITROX Analysis:-

Excel – http://1drv.ms/1FFoiVM

Notes – http://tinyurl.com/q9865xx

My View:-

  • Valuation:
    • Absolute EY%:
      • Trailing:
        • FY14 (EPS: 0.211) – Fair value 2.38 (Fair Value Uncertainty: EXTREME)
        • R4Q (EPS: 0.233) – Fair value 2.62 (Fair Value Uncertainty: EXTREME)
      • Forward:
        • FY15 (EPS: 0.238) – Fair value 2.68 (Fair Value Uncertainty: VERY HIGH)
        • FY16 (EPS: 0.269) – Fair value 3.02 (Fair Value Uncertainty: VERY HIGH)
      • EPS applied to reach the current stock price (3.63): 0.323
  • As guided, 1Q15 top line grew 45.7% yoy to RM33.3m thanks to ABI sales which surged 96% yoy. However, sales contracted sequentially by 21.7% as both MVS and ABI’s contribution fell by 36% qoq and 15% qoq, respectively. This is in tandem with the seasonally weaker semiconductor equipment spending.
  • I recognize that my valuation is not as compelling as what suggested by Maybank and Hong Leong analysts. To reach target price suggested by them, they assumed that EY% of VITROX can drop to around 5%. Looking at historical EY% band, the average of low EY% is 8.5%, and in 2011, VITROX’s EY% was at 5% level for few months.
    • Of course, we can always argue that "past performance is not an indicator of future results".
    • In my opinion, the recent price performance of VITROX already factored in the future potential earnings.
  • If VITROX encounters correction in future, I may buy VITROX.

Latest Financial – Q1 2015 Financial Report (23 May 2015) http://www.bursamalaysia.com/market/listed-companies/company-announcements/4745225

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

VITROX – Fundamental Analysis (28 Feb 2015)

VITROX Analysis:-

Excel – http://1drv.ms/1BMH0KZ

Notes – http://tinyurl.com/q9865xx

My View:-

  • Valuation:
    • Absolute EY%:
      • Trailing:
        • FY14 (EPS: 0.211) – Fair value 2.33 (Fair Value Uncertainty: EXTREME)
        • R4Q (EPS: 0.211) – Fair value 2.33 (Fair Value Uncertainty: EXTREME)
      • Forward:
        • FY15 (EPS: 0.239) – Fair value 2.64 (Fair Value Uncertainty: VERY HIGH)
        • FY16 (EPS: 0.269) – Fair value 2.97 (Fair Value Uncertainty: VERY HIGH)
      • EPS applied to reach the current stock price (3.41): 0.309
  • Key highlights from FY14 results briefing:
    • 3-month average book-to-bill ratio recovered to 1.05x in Jan 2015 from 0.84x in Dec 2014 on higher orders at ABI division.
    • Total order backlog stands at MYR18m as at mid-Feb 2015 and as such, 1Q15 revenue is expected to hit MYR33m-37m (-13%- 22% QoQ, +45%-62% YoY).
    • In FY15, management aims to hit MYR208m in terms of revenue (assuming forex of MYR3.30/USD1) with three key strategies in place:
      • Grow customer base by 20% in key markets (i.e. China, Taiwan and US),
      • Launch new low cost products (i.e. low cost AOI, mini AXI) to cater to the mass markets
      • Improve lead time and inventory management by 30%.
    • Operating margins to sustain between at 28%-30%, having considered
      • Positive exposure to the strengthening USD
      • Higher A&P expenses to capture a bigger market share.
  • I recognize that my valuation is not as compelling as what suggested by Maybank and Hong Leong analysts. To reach target price suggested by them, they assumed that EY% of VITROX can drop to around 5%. Looking at historical EY% band, the average of low EY% is 8.5%, and in 2011, VITROX’s EY% was at 5% level for few months.
  • Of course, we can always argue that "past performance is not an indicator of future results".
  • In my opinion, the recent price performance of VITROX already factored in the future potential earnings.
  • I was shareholder of VITROX where I sold off all VITROX at 2.7++ in Nov 2014. My original plan was to pick up VITROX again when VITROX having correction in December. Due to big discounts in O&G counters, I changed my plan accordingly.
  • If VITROX encounters correction in future, I may buy VITROX.

Latest Financial – Q4 2014 Financial Report (25 Feb 2015) http://www.bursamalaysia.com/market/listed-companies/company-announcements/1884325

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

VITROX – Fundamental Analysis (14 Dec 2014)

VITROX Analysis:-

Excel – http://1drv.ms/1uqayE7

Notes – http://tinyurl.com/kjzbcf7

My View:-

– Valuation:
  – Absolute EY%:
    – Trailing:
      – FY13 (EPS: 0.099) – Fair value 1.83 (Fair Value Uncertainty: VERY HIGH)
      – R4Q (EPS: 0.175) – Fair value 3.21 (Fair Value Uncertainty: MEDIUM)
    – Forward:
      – FY15 (EPS: 0.196) – Fair value 3.6 (Fair Value Uncertainty: LOW)
      – FY16 (EPS: 0.224) – Fair value 4.12 (Fair Value Uncertainty: LOW)
    – EPS applied to reach the current stock price (2.28): 0.124
    – At 2.28, the market assumed EPS 0.124. R4Q EPS already exceeded 0.124.
  – Absolute PE:
    – FY14 (EPS: 0.189) – Fair value 2.31 (Fair Value Uncertainty: HIGH)
    – R4Q (EPS: 0.175) – Fair value 3.35 (Fair Value Uncertainty: LOW)
  – VITROX is slightly undervalued.
– I still sees a lot of growth in Vitrox – the catalysts from Agilent’s exit in 2016 and competitive products should help it compete to get individual orders.

Latest Financial – Q3 2014 Financial Report (20 Nov 2014) http://www.bursamalaysia.com/market/listed-companies/company-announcements/1799725

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

VITROX – Fundamental Analysis (23 Nov 2014)

VITROX Analysis:-

Excel – http://1drv.ms/1uqayE7

My View:-

– Fair value:
  – Absolute EY%:
    – Trailing:
      – FY13 (EPS: 0.104) – Fair value 1.73 (Fair Value Uncertainty: EXTREME)
      – R4Q (EPS: 0.175) – Fair value 2.91 (Fair Value Uncertainty: HIGH)
    – Forward:
      – FY14 (EPS: 0.18) – Fair value 3 (Fair Value Uncertainty: MEDIUM)
      – FY15 (EPS: 0.196) – Fair value 3.26 (Fair Value Uncertainty: MEDIUM)
    – EPS applied to reach the current stock price (2.61): 0.157
  – At 2.61, the market assumed EPS 0.157. 0.157 is achievable based on the current outstanding booking, but this also means the current price already factored in its superb trajectory growth.
  – VITROX is slightly undervalued.
– I believe that FY14 and FY15 will be a growth year for VITROX because of the recovery of global semiconductor industry and improving US, Japan and European markets.
– I still sees a lot of growth in Vitrox – the catalysts from Agilent’s exit in 2016 and competitive products should help it compete to get individual orders. But with the trend moving towards a single supplier, which provides the entire array of testing equipment that seamlessly talk to each other, Vitrox is currently being left behind. A substantial change in its internal R&D activity to innovate or potential acquisitions with talents or acquisitions with new product offerings to complement its existing portfolio, are the only ways for Vitrox to grow in the longer term.
– Although SEMI’s Sept preliminary semiconductor equipment industry’s book-to-bill ratio recorded the first dip below parity since Sept 2013 to 0.94, we are not overly concern and attributing it to seasonality effect.
– Gartner expects global semiconductor capital spending to be robust in 2015, growing 11.3% yoy to reach USD43.6bn.
– China’s enormous investment (Rmb1tr) into semiconductor industry may lead to potential multi-year high demand of ViTrox’s products.
– Incentives in the form of capital allowance on automation expenditure to encourage automation in the manufacturing sector as tabled in Budget 2015 would also spur demand for its products.

Latest Financial – Q3 2014 Financial Report (20 Nov 2014) http://www.bursamalaysia.com/market/listed-companies/company-announcements/1799725

At the time of writing, I owned shares of VITROX.

VITROX – Fundamental Analysis (27 Aug 2014)

VITROX Analysis:-

Excel – http://1drv.ms/1ASO6cF

My View:-

– Fair value:
  – 5Y DCF: 2.10 – 2.39 (MOS: -28% -> -13%)
  – Absolute EY%:
    – Trailing:   
      – FY13 (EPS: 0.104) – Buy below 1.15, fair value 1.37 (MOS: -97.2%)
      – R4Q (EPS: 0.177) – Buy below 1.95, fair value 2.33 (MOS: -16%)
    – Forward:   
      – FY14 (EPS: 0.18) – Buy below 1.98, fair value 2.36 (MOS: -14.2%)
      – FY15 (EPS: 0.183) – Buy below 2.02, fair value 2.41 (MOS: -12%)
    – EPS applied to reach the current stock price (2.7): 0.205   
  – At 2.7, the market assumed EPS 0.205. 0.197 is achievable based on the current outstanding booking, but this also means the current price already factored in its superb trajectory growth.
  – VITROX is over valued. The current price already factored in the future earnings.
– I believe that FY14 will be a growth year for VITROX because of the recovery of global semiconductor industry and improving US, Japan and European markets.
– I still sees a lot of growth in Vitrox – the catalysts from Agilent’s exit in 2016 and competitive products should help it compete to get individual orders. But with the trend moving towards a single supplier, which provides the entire array of testing equipment that seamlessly talk to each other, Vitrox is currently being left behind. A substantial change in its internal R&D activity to innovate or potential acquisitions with talents or acquisitions with new product offerings to complement its existing portfolio, are the only ways for Vitrox to grow in the longer term.
– I will continue to hold VITROX, and will accumulate VITROX if there is correction.

Latest Financial – Q2 2014 Financial Report (21 Aug 2014) http://www.bursamalaysia.com/market/listed-companies/company-announcements/1716629

At the time of writing, I owned shares of VITROX.