Vitrox Berhad

Vitrox-At An Inflection Point (CIMB )

This vision inspection equipment maker is on the cusp of explosive growth, having successfully executed its business re-engineering. It is well-placed to tap into the vast revenue opportunity of US$1.0bn-1.2bn p.a. presented by its new area of manufacture as it rides on its association with Agilent. Vitrox (VITRO MK, Not Rated) will benefit from Agilent’s technology, channel partners, supply chain and outsourcing, and shorter product development cycle.

The key drivers are i) its takeover of Agilent’s market share for AOI and AXI machines, ii) the drive towards more automated vision inspection, iii) a wider product offering, and iv) margin expansion possibilities.

Vitrox is trading at 5.5 x FY11 P/E, a 25% discount to its peers due to its smaller market cap, lower ROE and dividend yield. If we were to apply a 20-30% P/E discount to its peers on FY12 EPS to factor in execution risks, potential shortfall in market share targets and Vitrox’s smaller size, we would arrive at a valuation of RM1.83-2.09, which offers upside of 61-83% from current levels. Vitrox is at an inflection point, buoyed by its new AOI and AXI machines which have been gaining rapid acceptance

Posted by Smartbiz

Financial position as at 30 June 2010

NTA RM0.41
Cash RM28.9 mil
Borrowings RM0.00

1Q EPS RM0.0288 ( Profit RM4.895 mil; Turnover RM12.98 mil )
2Q EPS RM0.0648 ( Profit RM9.874 mil; Turnover RM26.12 mil )
Projected Annualised EPS RM0.2232
Projected Annualised net profit RM34 mil

Share Capital RM15.5 mil
Share Premium RM1.22 mil
Treasury Share (RM1.022 mil)
Retained Earning RM47.61 mil
Shareholders Fund RM63.3 mil

Non Current Asset RM16.09 mil
Current Asset RM62.258 mil
Current Liabilities RM14.457 mil
Long Term Liabilities RM0.581 mil

Number of share buy back 2,714,700
Number of shares 155.5 million

Watch out for the announcement on its 3rd quarter profit. Good counter to invest since its earning is on an uptrend.

Fair price is RM2.20 ( 10 x its EPS if its performance is maintained )