Highlight Globetronics continues to ride high

Highlight Globetronics continues to ride high
Business & Markets 2013
Written by Esther Lee of theedgemalaysia.com
Friday, 28 June 2013 16:30

It may not be an overstatement to say GLOBETRONICS TECHNOLOGY [] BHD [] is a good proxy for smart device sales.

The Penang-based semiconductor company has the exclusive rights to supply its proximity sensor to a popular US-based smartphone maker for a year. It also supplies about 30% of its temperature-compensated frequency devices to a well-known South Korean GPS company.

“There is probably one or two of the components we manufacture in every electronic device you own. The [growth] potential is huge,” says its CEO Heng Huck Lee.

Given its product-specific manufacturing approach, Globetronics’ earnings are growing by leaps and bounds when others in the industry are trying to keep their heads above water.

In 1QFY2013 ended March 31, its net profit soared 67% to RM10.195 million from a year ago. In FY2012 ended Dec 31, net profit jumped 55% to RM41.34 million or 15.31 sen per share from the previous year. Revenue rose to RM290 million from RM265 million previously.

The vast market potential has given Globetronics’ management the confidence that revenue and profit growth in FY2013 will be much higher than in the previous year.

HwangDBS Vickers Research says in a report that rising demand for smartphones will support the company’s earnings growth over the next two years.

In the electrical and electronics (E&E) industry, where, as Heng puts it, “change is the only constant”, the company is constantly looking for the next big thing to drive the market.

“We are not looking at current products. We are looking at a continuous series of products,” says Heng, citing the proximity sensor. “But what will be driving it in the near future are gesture and other types of sensors.”

Globetronics opted for organic growth in the last 22 years, but now, management is looking at a number of foreign companies, the businesses of which are synergistic with its own.

“We grew organically. It was the right strategy, but a lot of exciting opportunities are coming our way and forcing us to take a hard look at them. Management is scrutinising a couple [of the companies]. In the next 12 months, we hope to make at least one acquisition,” Heng tells The Edge.

Funding these acquisitions will not be a problem for the company for as at April 2013, it had a cash pile of RM120 million.

Globetronics’ ability to stay ahead of the pack and be a pacesetter in the local E&E landscape is the reason its profit margins are better than those of its competitors.

“We use technological advances to create a niche [for our products]. In terms of functionality and overall product design, our products stay ahead of the mass-market producers. This means that everything we produce is ahead of the end product introduced to the market,” Heng explains.

According to him, light-emitting diode (LED) components, sensors and timing and quartz crystal devices are products in demand that will continue to drive the company’s earnings.

LED components are used in solid-state lighting while proximity sensors are used in smartphones and tablets. Timing and quartz crystal devices, meanwhile, include temperature-compensated frequency instruments used in global positioning systems.

The company is also developing several new products based on its three core components, including a new generation multi-port proximity sensor for motions commonly used in gaming devices like the Nintendo Wii. It is also venturing into LED components used for verticulture and the production of proprietary optical lenses.

Globetronics is well known among multinational corporations. In terms of overseas clientele, Heng says Japan represents its biggest base, followed by the US and Europe.

That the stock is well sought by investors is evident in the 83% rise in its price to RM2.18 last Thursday from RM1.19 a year ago.

Analysts are upbeat on the company’s prospects and have set a 12-month target price of RM2.76 to RM3 for the counter.

“We expect demand in the smartphone and tablet market to remain strong, driven by the consistent release of new models. The 1Q2013 average book-to-bill ratio was healthy at around 1.1 times and could remain so due to seasonality. The release of new models (for example, iPhone 5, Samsung Galaxy SIV and HTC One) will also support sales, which, in turn, will boost demand for Globetronics’ products,” says HwangDBS Vickers Research.

For Globetronics, says Heng, the aim since it was founded is stable growth.


This article first appeared in The Edge Weekly Malaysia, on June 24, 2013.