2015年2月27日星期五

Vitrox - Insatiable hunger for growth

Date: 27/02/2015

Source : MAYBANK
Stock : VITROX     Price Target : 4.05     |     Price Call : BUY
Last Price : 3.41     |     Upside/Downside :  +0.64 (18.77%)


  • Aims for greater heights in FY15 with key strategies in place.
  • Bulky orders from new/existing Tier-1 customers, stronger replacement cycle to provide earnings growth in 1H15.
  • Reiterate BUY with a higher TP of MYR4.05 (+14%), pegging it to 13.5x CY16 PER (from 12.6x).

What’s New

We remain excited on ViTrox’s near and mid-term earnings growth prospects post its FY14 results briefing yesterday. Key highlights:
  • 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). Recall that 1Q and 4Q are typically the weaker quarters for ViTrox. Nonetheless, profitability could sustain given that YTD forex has averaged MYR3.59/USD1 (+9% from 4Q14 effective rate of MYR3.30/USD1).
  • In FY15, management aims to hit MYR208m in terms of revenue (assuming forex of MYR3.30/USD1) with three key strategies in place: (i) grow customer base by 20% in key markets (i.e.
  • China, Taiwan and US), (ii) launch new low cost products (i.e. low cost AOI, mini AXI) to cater to the mass markets and (iii) improve lead time and inventory management by 30%.
  • Operating margins to sustain between at 28%-30%, having considered (i) positive exposure to the strengthening USD and (ii) higher A&P expenses to capture a bigger market share.

What’s Our View

We raise our FY15/16/17 net profit forecasts by 3%/8%/8% after incorporating a higher ABI sales volume, offset by (i) lower selling price from the launches of new low cost products, (ii) a higher effective tax rate of 12% (from 3%) in FY15, incorporating 2 quarters of taxable profits (2Q15 and 3Q15) from delays in its pioneer status extension. Valuation remains undemanding, BUY.
Source: Maybank Research - 27 Feb 2015