Another record earnings delivery for Globetronics

by **Cals** Fri 08 Aug 2014, 03:07

Business & Markets 2014

Written by Affin Investment Bank

Thursday, 07 August 2014 10:18

Globetronics Technology Bhd
(Aug 6, RM4.64)
Maintain buy with target price of RM4.82: Globetronics reported strong net profit for the first half ended June 30 of financial year 2014 (1HFY14) of RM31.4 million [+29.0% year-on-year (y-o-y)]. Excluding one-off items, 1HFY14 core net profit was slightly lower at RM30.4 million (+29.0% y-o-y).

The strong earnings growth was largely underpinned by revenue growth of 6.8% y-o-y to RM174 million and earnings before interest, taxes, depreciation, and amortisation (Ebitda) margin expansion to 31.6% versus 29.2% in 1HFY13.

The y-o-y revenue growth is largely attributed to the higher demand for its sensor-related products as well as higher volume loadings for its timing devices.

Globetronics’ stronger Ebitda margins are largely underpinned by better economies of scale as well as effective cost measures carried out by management.

Going forward, management guided that margins will be partially diluted after the turnkey manufacturing of its light emitting diode sensor module commences in 2HFY14.

On the whole, 1HFY14 core net profit of RM30.4 million was within expectations, accounting for 47% of our and street estimates.

Sequentially, Globetronics reported revenue for the second quarter ended June 30 (2QFY14) of RM90.6 million (+8.6% quarter-on-quarter [q-o-q]) while Ebitda margins remained flattish at 31.4% versus 31.7% in 1QFY14.

In tandem with the higher revenue, Globetronics’ 2QFY14 core net profit increased by 11.1% q-o-q to RM16 million — another record quarterly earnings for the company.

The better operating performance was largely due to a stronger pick-up in demand from its key customers. Management has also guided that the company is expecting to launch several new products in 2HFY14. The products are related to the multi-port gesture/image/proximity sensors. The contribution from these value-added sensors coupled with the higher ramp-up in volume for its Quartz crystal timing device (approximately 140 million to 150 million units per month) will continue to drive earnings in 2HFY14.

While we believe Globetronics is on track to achieve our 33% earnings per share growth forecast for FY14E, we do not rule out the possibility of earnings upgrades in FY15E and FY16E if the other sensor products that Globetronics is currently exploring materialise. — Affin Investment Bank, Aug 6

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This article first appeared in The Edge Financial Daily, on August 7, 2014.[/size]