Affin IB Research: Strong catalysts to push Globetronics’ valuations

by **Cals** Tue 16 Apr 2013, 16:43

Affin IB Research: Strong catalysts to push Globetronics’ valuations
Business & Markets 2013
Written by Charlotte Chong of the edgedaily.com
Tuesday, 16 April 2013 14:51

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KUALA LUMPUR (APRIL 16): Affin Investment Bank maintained a ‘buy” rating on GLOBETRONICS TECHNOLOGY [] BHD [] at RM1.76 with an unchanged target price of RM2.11 and said there were strong catalysts that can push the stock’s valuations higher.

In a note today, Affin Investment said that there were three catalysts that could trigger a further re-rating, which are the sharp valuation discount that Globetronics trades next to peers, vastly improving earnings visibility and high likelihood of positive earnings surprises.

From a peer comparison perspective, Globe traded at a 30% to 90% discount to similar component suppliers to major global component suppliers to smartphone and table manufacturers, it said.

The research house said that the replacement model for its current proximity sensor and optical lenses should provide a steady ramp up in earnings momentum from 2HFY13 to FY14.

“Our earnings growth forecast for FY14 is merely 8% although we believe that there is high potential for positive earnings surprises.”

It noted that the surprises could come from the proliferation of proximity sensors used in smartphones to tablets, co-development of multi port sensors and penetration of existing proximity sensor product into the China market beyond the exclusive period ending July 2013.

“We see potential in earnings upside both from existing products and new ones including its LED modules and multiport proximity sensors,” it said.

Affin Investment expected sequential momentum to be weaker after a strong fourth quarter 2012 core net profit, adding that it believed that both revenue and earnings would be stronger on a year-on-year (yoy) basis, and on track to meet its FY13 earnings forecast.

For the quarter ended Dec 31, 2012, Globetronics’ net profit surged 124% yoy to RM11.2 million. Its quarterly revenue came in at RM85.3 million, up from RM57.9 million in FY11.