MIDF raises Globetronics TP by 41.5% to RM4.19

by **Cals** Thu 07 Nov 2013, 14:12

Business & Markets 2013

Written by Zatil Husna of theedgemalaysia.com

Thursday, 07 November 2013 12:22

KUALA LUMPUR (Nov 7): MIDF Research has raised Globetronics Technology Bhd’s target price (TP) to RM4.19 from RM2.96 previously, due to attractive dividend yield and positive earnings outlook.
It has reiterated its ‘buy’ call on the stock.
This is despite the company undergoing a major product transition.
The research house said due to the group’s undergoing product transition from integrated circuit to sensors, it would be difficult to attach a fair one-year forward multiple to a longer-term growth story.
“But nonetheless, at current price level, Globetronics still offers attractive dividend policy and yield, thus we are switching our valuation methodology to Dividend Discount Model (DDM) from PER previously,” it said.
The research house said despite heavy capex spending, the group’s dividend yield at 6% for next year stays attractive.
It also noted that Globetronics expects to spend up to RM40 million in the first half of next year (1HFY14), mainly for expansion and new product development.
The research firm said the sensor segment will account 50% of Globetronics’ topline by 2015 from 26% currently. This is due to the demand for proximity sensors and optical interface sensors will chart the company’s growth.
“We are revising upward our earnings estimate for 2014 by 8.7% to RM65 million as we are more bullish on the demand for the sensor product segment.
“By 2015, we expect earnings to hit RM77.5 million with the sensor segment making up to 50% of the company’s revenue.”