Auspicious start for Globetronics with a surprise dividend

In The Edge Financial Daily Today 2013
Written by theedgemalaysia.com
Friday, 03 May 2013 11:13
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Globetronics Technology Bhd (May 2, RM1.81)
Maintain buy at RM1.82 with a target price of RM1.96: Globe-tronics
registered a net profit for the first quarter ended March of 2013 financial
year (1QFY13) of RM10.2 million, which was within our and consensus
expectations at 21.7% of our and 21.2% of consensus full-year
estimates.
The strong 64.5% year-on-year (y-o-y) growth was on the back of
improved profit before tax (PBT) at all its segments, especially Malaysia
and Singapore, which represent 68.7% and 19.7% of the group’s PBT.
Malaysia added RM1.3 million and Singapore RM2.1 million from RM6.8
million and RM200,000 in 1QFY12.
Revenue for 1Q grew solidly by 36.4% y-o-y to RM77.5 million,
mirroring the industry growth as represented by the Semiconductor
Industry Association’s (SIA) global semiconductor sales number in
January and February. There was a 9.2% quarter-on-quarter (q-o-q)
decline but this was expected given the disruptions from the festivities.
Globetronics’ Malaysian and Singaporean segment were the main
contributors to its revenue and subsequent growth. Both segments
contributed 94.1% to 1Q revenue. Malaysian segmental revenue grew
15% y-o-y to RM51.7 million, while the Singapore segment grew 316%
to RM21.2 million. China posted revenue of RM1 million and the US
RM3.5 million from RM100,000 and RM6.6 million in 1QFY12.
Earnings before interest and tax (Ebit) margin continued to improve from
the previous quarter. Ebit margin for 1QFY13 improved 2.9 percentage
points from 1QFY12 to 15.2%. From the preceding quarter, Ebit margin was 3.3 percentage points higher despite the
disruptions. We believe this was due to better economies of scale and by reducing the headcount with the accompanying
increase in productivity and increase in automation.
One business aspect we like is that Globetronics has diversified its products into strong growth areas. We believe this was
one of the reasons for its stellar performance in FY12, which we expect will continue into FY13. With the encouraging industry
numbers recently, as represented by SIA, we believe double digit earnings growth for Globetronics is achievable.
We are maintaining our FY13 and FY14 net profit forecasts for now, given that the result was within expectation. We expect
Globetronics will perform better in FY13 due to the industry recovering from its malaise of FY12. However, should the
industry unexpectedly face another downturn, we believe Globetronics will be able to weather it because it remained resilient
in FY12. We maintain our “buy” recommendation as we expect its earnings to be sustained in FY13 and dividend yield to
remain attractive at more than 5%. Our unchanged target price of RM1.96 is derived by pegging FY13 earnings per share to
11.4 times price-earnings ratio, which is its five-year historical average. — MIDF Research, May 2