HLIB Research Summary - 3 Oct 2014

ViTrox: The Rmb1 Trillion “Quan Xi”

• China is entering into the semiconductor era to fuel its economy growth. A task force was convened to develop a policy framework that is targeting a CAGR for the industry of 20% between 2015 and 2020, with potential financial support from the government of up to Rmb1tr (USD170bn) over the next 5 to 10 years.
• We think this will be a boon to ViTrox as a semiconductor equipment supplier leading to potential multi-year high demand of its products.
• With its cutting edge precision technology, we are confident that ViTrox has the upper hand over competitions and can win more market share, especially when 20nm and below chips are becoming an industry norm.
• Its presence is well-established and has been increasing both sales channel partners and customers in China .
• Upgrade from HOLD to BUY after raising our fair value to RM3.17, pegged to 1SD above 5-year historical average P/E multiple of 16.2x.

Traders Brief: Continued weakness unless staging a decisive breakout above 200-d SMA

• Ahead of the key U.S. jobs data tonight and disappointment on ECB’s meeting outcome coupled with the surprised 20sen petrol hike effective yesterday, investors sentiment will remain muted ahead of the widely-anticipated Budget 2015 to be tabled on 10 Oct.
• Given the failure to stage a breakout above the immediate resistance of 200-d SMA in the last few sessions, the odds would favour weaker trend ahead, targeting 1800-1820 zones if the 6-month low of 1829 support cannot hold.
• On the upside, the 200-day SMA at 1852 may continue to act as resistance in the immediate term, with higher targets at 1858 (30-d SMA) and 1867 (23.6% FR)
• Today, we have a write-up on regional bourses technical outlook; kindly refer to our separate report (Trading Idea – Regional Bourses Technical Outlook).

Trading Idea: Overview of Regional Market Technical Outlook 

• Technically, most of the regional market technical outlooks (except for SHCOMP) are still showing weaknesses ahead as their corrections are still intact coupled with negative technical indicators.