Auspicious start for Globetronics with a surprise dividend Print E-mail

Source: The Edge Malaysia (May 3, 2013)


Maintain buy at RM1.82 with a target price of RM1.96: Globetronics 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