This article first appeared in The Edge Financial Daily on November 20, 2017

ViTrox Corp Bhd
(Nov 17, RM5.54)
Maintain hold with an unchanged target price of RM4.54: Nine months of financial year 2017 (9MFY17) sales of RM232 million were translated into a core net profit of RM62 million, which came in within expectations, accounting for 78% and 76% of our and consensus full-year forecasts respectively.

ViTrox Corp Bhd has approved an interim tax-exempt dividend of 1.5 sen per share (third quarter [3Q] of FY16: 1.25 sen post-bonus issue), pending entitlement and payment dates.

It was another record-breaking quarter, with both revenue and core earnings achieving new highs at RM84 million and RM23 million respectively. While 4QFY17 results are expected to be sustained at this level, challenges remain in terms of raw material sourcing, floor space constraints, seasonal closures and the relocation to the new Batu Kawan Campus 2.0.

Quarter-on-quarter, revenue grew 9% to RM84 million, thanks to higher contributions from automated board inspection (ABI) and the machine vision system (MVS). Core profit after tax (PAT) was up 22%, on the back of margin expansion, thanks to economies of scale.

Year-on-year, turnover grew 47%, thanks to higher demand for the MVS and ABI, which grew 30% and 55% respectively. The increase was supported by stronger demand from an expanded customer base and positive product acceptances. Core PAT was up 80%, attributable to improved economies of scale.

Year to date, the top and bottom lines have expanded 36% and 46% respectively, for the same reason mentioned above. Recall that 9MFY16 saw a one-time tax refund amounted to RM5.5 million, associated with the renewal of pioneer status in the prior year. — Hong Leong Investment Bank Research, Nov 17