Vitrox: Earnings Continued To Rise

Result Update

For QE30/6/2017, Vitrox's net profit increased by 15% q-o-q and 48% y-o-y to RM21million while revenue increased by 12% q-o-q or 37% y-o-y to RM78 million. Both revenue and profit before tax have recorded an increase of 12% and 16% respectively. The increase in PBT was due to increase in revenue recorded for Machine Vision System (MVS) and Automated Board Inspection (ABI) plus other operating income generated from grant income.


Table: Vitrox's last 8 quarterly results


Chart 3: Vitrox's last 39 quarterly results

Valuation

Vitrox (closed at RM4.80 uesterday) is now trading at a PE of 30 times (based on last 4 quarters' EPS of 15.96 sen). At this PER, Vitrox is deemed fully valued. [Note: Vitrox has completed its 1-for-1 bonus issue in early July. Like most listed companies who carried out their bonus issue, the date of the bonus is conveniently put right after the end of a financial quarter. This gives rise to misleading comparison between EPS & share price. If you are not an existing shareholder, you will compare the share price with the reported but unadjusted EPS and come to the wrong conclusion on valuation.] 

Technical Outlook

Vitrox rose sharply after it broke above the RM2.00 horizontal line in late February (which coincided with its strong result for QE31/12/2016). The rise went exponential when the company proposed its bonus issue in May.

 
Chart 1: Vitrox's weekly chart as at Aug 17, 2017 (Source: Shareinvestor.com)

Vitrox may be pressing against the upper line of its upward channel. This line may act as a resistance, capping its upside until it has been taken out.


Chart 2: Vitrox's monthly  chart as at Aug 17, 2017 (Source: Shareinvestor.com)

Conclusion

Based on improving financial performance & bullish technical outlook, Vitrox could be a good stock for long-term investment. However, it may be a good idea to take some profit as the share price upside may be constrained by technical resistance.

Note:

I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.