HDBSVR maintains Buy on Globetronics

by **Cals** Wed 09 Oct 2013, 01:45

Published: Tuesday October 8, 2013 MYT 9:44:00 AM
Updated: Tuesday October 8, 2013 MYT 9:46:44 AM
HDBSVR maintains Buy on Globetronics
KUALA LUMPUR: Hwang DBS Vickers Research (HDBSVR) is maintaining a Buy onGlobetronics Technology with a target price of RM3.50 as the latter explores and widens product applications.
“Our TP is pegged to 15 times FY14F earnings per share (EPS). Valuations are attractive at 11 times to 13 times FY14-15F EPS, supported by 6%-7% net yield (75% payout ratio) and 23-24% returns on equity (ROE).
It said the roadshow with Globetronics in Hong Kong was well-received because the group has been consistently profitable and offers growth potential as its niche products are used in smartphones and tablets.
HDBSVR said the FY13-14F EPS growth is intact at 22%-25% and may be the base case scenario given additional earnings from proximity sensors and TCXO (temperature compensated frequency devices).
It said the key takeaways from the roadshow were a possible ramp-up of TCXO product capacity to 15 million units/month (from 10 million) as it assumed nine million units to 11 million units in FY13-15 forecast.
HDBSVR also highlighted the potentially higher dividends: the group may pay out more than our assumption of 75% of FY13 net income, to reward shareholders (9.0 sen dividend payment will go ex on Oct 16).
The research house pointed Globetronics is exploring and widening product applications in several industries such as automotive and agriculture, especially LED/lighting components. Also, volume loading remains healthy for its LED, timing devices and proximity sensors.