Maybank Investment Bank has done a review of ViTrox’s ESG practices using its proprietary scoring methodology and assigned it an above-average overall score of 55. It scores well by most metrics but could do better in its ESG target-setting and linking top management compensation to the fulfilment of those targets. The research households the opinion that its ‘net-zero’ Scope 2 carbon emission commitment is currently lacking as it is yet to account for Scope 3 (S3) emissions despite having a global customer/supplier base. Its ‘Targets’ score in its scoring model could improve once it accounts for S3 in future ESG disclosures.
E: Putting the environment at the forefront
ViTrox has made significant headway over the past 3 years in reducing its greenhouse gas (GHG), energy, water, and recycled waste intensities. Its most tangible commitment towards being a “go-green practitioner” was the installation of a 458kW industrial-scale PV system at its Campus 2.0 in Aug 2018 – the system generated 688MWh of energy or 13% of total
electricity consumption for FY21 (highest RE % amongst its sector peers).
S: Setting a high bar for workplace wellbeing
Although its workforce increased 17% YoY in 2021, management continues to be a proponent of gender diversity as the ratio of women in the workforce/ executive roles increased in-tandem to 30.0%/23.3%. In addition to sound OSH policies (LTIF/IR rates decreased YoY by 43%/24% in FY21), management has also been successful in introducing a suite of social programs to ensure employee health and wellbeing – most notably the V-Meal program that provides complimentary vegetarian meals to all employees 5 days a week.
G: Sufficient checks and balances in place
Corporate governance is strong with the company having no reported controversies in the past 5 years. Its sustainability framework is well-structured and complemented by sound whistleblower, anti-bribery and responsible sourcing policies. In July 2021, it also formed a standalone ESG Steering Committee (chaired by the CEO and reports directly to the Board)
to advocate, evaluate and integrate sustainability strategies in the company’s day-to-day operations. Its Board comprises of an independent majority (57%) whilst all four Board committees are also chaired by IDs.
Risk statement
There are several risk factors for the research house’s earnings estimates, target price, and rating for ViTrox. A sharp downturn in the global markets for electronics will affect the capex spending of OSAT and EMS players involved and this will result in softer demand for ViTrox’s inspection equipment. Additionally, forex volatility, especially USD/MYR, will also affect ViTrox’s earnings, as over 2/3 of its revenue and about 1/3 of its COGs are denominated in USD. Lastly, aggressive monetary policy will have an adverse impact on the tech sector which tends to have rich valuations.
