Stocks With Likelihood Of Corporate Exercise: Vitrox Corp

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Vitrox Corp Bhd
Vitrox is involved in the development and production of automated vision inspection systems and digital automated vision inspection equipment and modules. The company’s customer base includes clients from Malaysia, Singapore, China, Japan and the UK.

The ‘Internet of Things’ (IoT) concept has recently caught on in Malaysia. IoT is a computing concept that describes a future where everyday physical objects will be connected to the internet and be able to identify themselves to other devices.

Vitrox has jumped on board with an app called ‘What’s My Heart Rate’, which, like its name implies, is able to determine the user’s heart rate and temperature using a smartphone camera. The company is also working on an application which would measure the circumference of babies’ heads to eliminate the need to physically take the measurement in order to gauge the development of infants.

Though such applications of technology in the medical field are not new, it might open new avenues for companies such as Vitrox, which has operations in the semiconductor and electronics industries. Vitrox has said that it is open to possible acquisitions to boost growth and enhance value propositions to its existing and new customers.

Vitrox’s revenue has been steadily growing since 2011 with net margins of over 20%. In 1H2014, revenue doubled to RM87.9 million while net profit more than tripled to RM24 million, already equivalent to 2013’s full year profit of RM 24.1 million.

The stock is trading at 3.8 times book with a 12-month trailing P/E ratio of 14.2 times. Though valuations appear to be slightly on the high side, return on equity is also high at 32.9% and the company’s earnings are growing rapidly. Net cash stood at RM45.9 million, or 19.7 sen per share, as at 30 June 2014.

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This article first appeared in The Edge Financial Daily, on October 28, 2014.