We attended the company’s analysts briefing recently and
came back feeling rather neutral on the company’s outlook in the short term.
Vitrox posted a poor set of results in 4QFY11 due to lower sales volume across
its business segments. The slowdown in the semiconductor and electronics
industry due to the European debt crisis and a sluggish US economy were the
main causes of the weak result. Management expects the industry to recover only
in 2HCY12 and guided that the group’s next 1QFY12 results may be worst than
4QFY11. Recently, the group has been trying to break into the automotive industry
in Europe. However, we think this would be a challenging task for the company
as there are high barriers to entry into the European market. We currently value
Vitrox at a target price of RM0.79 based on a PER of 6.6x (3-year historical
forward PER) over the consensus’ FY12 EPS forecast of 12.0 sen.
Poor results for
4QFY11. Vitrox’s 4QFY11 results
posted a decline of 32% and 88% in revenue and net profit respectively compared
to the preceding quarter. The current macroeconomic slowdown has dampened the
demand for its machine vision systems (MVS), electronic communication system
(ECS) and automated board inspection (ABI). For the full year FY11 result, the
impact was lesser with revenue declining 10% YoY and net profit seeing a drop
of 30%.
Dividend. An
interim dividend of 1 sen per share tax exempt was announced by the company in
4QFY11. The company said it may proposed a further 1 sen tax exempt final
dividend for FY11 later in the middle of this year.
Better outlook in
2HCY12. Management guided that the outlook for 1HCY12 is still uncertain
due to the current global economic uncertainty. Hence, the group’s 1QFY12
result would likely be in the red as manufacturers are still uncertain about
the economy and only when they see a
recovery will they start to order additional machines from Vitrox. That said,
management believes that the industry will rebound in 2HCY12.
Challenging Europe
automotive market. The group foresees the demand for its machine visionary
products to rise in the European automotive market. Although the group itself
believes that it is a challenging task to penetrate into Europe due to the high barrier
of entry, it is still
firm on trying
to break into
the market here since the Europe market is a big market and success
would mean a much improved prospect for the group’s earnings.
On the watch list.
As we have yet to re-activate our coverage on the company, we do not have any
recommendation on Vitrox at this juncture. Nonetheless, based on the consensus’
FY12 EPS of 12.0 sen and 3-year historical forward PER of 6.6x, we gather that
Vitrox can be fairly valued up to RM0.79 at this juncture.
Source: Kenanga
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