Post briefing: ViTrox Corporation (VITRO MK; BUY; TP: MYR3.80) - One step back, two steps forward?

ViTrox Corporation (VITRO MK; BUY; TP: MYR3.80) - One step back, two steps forward?

• A flat to mild growth in FY15 earnings. Order backlog is decent at MYR17m as at mid-Nov and book-to-bill ratio remains healthy >1x as at end-Oct. Expect a flat to mild earnings growth in FY15 as positive exposure as a net USD exporter offsets (i) weakness in volume sales (esp. in MVS-T).
• A better 2016, stay upbeat. New product introduction by the MVS-T division in 4Q15 to penetrate a new market segment (i.e. the smaller 2x2mm and 2.5x2.5mm IC packages segment) has gained traction (secured 2 orders before launch) and is expected to boost sales in 2016. We raise our FY16 MVS-T volume sales forecast by 20% but cut FY15-16 ABI volume sales forecast by 18%-22% for launch delays of the mini AXI and low-cost AOI to 2016.
• Up FY16/17 earnings forecasts by 4% each as we revise up ASP forecasts in FY16/17 assuming USD1/MYR4.10 average vs USD1/MYR3.85 previously. Our FY15 assumption of USD1/MYR3.85 is unchanged.
• Maintain BUY; TP lifted to MYR3.80. We continue to like ViTrox; its key investment thesis is intact with catalysts being (i) stronger replacement cycle and higher adoption of AXI equipment and (ii) positive exposure to a stronger USD. Undemanding valuations at 10x FY16 ex-cash PER.