Globetronics riding high Print E-mail

Source: The Edge Malaysia (April 15, 2013)

KUALA LUMPUR: Like it or not, semiconductor stocks aren’t that sexy these days compared to the dotcom boom days from 1997-2000. But GLOBETRONICS TECHNOLOGY BHD, which has made speedy efforts to diversify its product portfolio, seems to remain attractive for now. 

Its earnings speak well, including its share price which rebounded from a low of 80 sen in January last year to a five year-high of RM1.95 last week.  

For its financial year ended Dec 31, 2012 (FY12), Globetronics’ net profit surged nearly 55% to RM41.3 million or 15.31 sen per share from RM26.7 million or 9.99 sen per share. Revenue grew 9.4% to RM290 million from RM265 million a year ago.

The sharp rise in net profit was also partly due to gains on land disposal which amounted to RM4.6 million, apart from higher volume loadings from customers, a better product mix and economies of scale. 

“Globetronics has been strategically pre-positioning in these markets with a huge capital expenditure — we were able to reap the growth opportunities at a most precise timing.” Globetronics CEO Heng Huck Lee told The Edge Financial Daily.

“Both of these segments were expanding at an annual growth rate of more than 20%,” he said in an email reply.

The company’s move to diversify into smart phones and LED lighting products is reaping fruits. And that puts Globetronics in a better position to ride the dynamic market demand for semiconductors. 

Globetronics has expanded its market to secure new orders and contracts with its technologically leading products from established brands around the world, said Heng.

“The Malaysian semiconductor industry will continue to face tremendous pressure to move up the value chain.”

He said it was important to have the ability to deploy resources to shift into new production technology and capacity while maintaining cost competitiveness.

That said, Globetronics has always adopted a cautious stance on its expansion strategy, particularly in new market segments. “We probably had the least excess capacity over the last few quarters,” said Heng. 

Other players are facing problems of excess capacity due to an inability to secure new orders and a large stockpile of products that are getting obsolete and hard to sell, according to him. 

For the quarter ended Dec 31, 2012, Globetronics’ net profit surged 124% year-on-year to RM11.2 million. Its quarterly revenue came in at RM85.3 million, up from RM57.9 million in FY11. Globetronics’ earnings are far more impressive compared with other local semiconductor players. 

Unisem’s net loss widened to RM19.5 million in its fourth quarter ended Dec 31 compared with a net loss of RM2.5 million a year ago. Revenue came in lower at RM269.4 million against RM273.1 million. 

Unisem attributed its losses to impairment losses on assets, provision for write-off on inventory, retrenchment costs, higher interest and depreciation charges as well as lower foreign exchange gains.

For the full FY12, Unisem incurred a net loss of RM32.3 million against a net profit of RM19.85 million. Revenue was lower at RM1.09 billion compared with RM1.16 billion the year before. 

For Malaysia Pacific Industries Bhd (MPI), its net loss narrowed to RM1.8 million for its second quarter ended Dec 31, 2012, compared with RM16.2 million for FY11. 

For the six months ended Dec 31, MPI posted a net loss of RM1.6 million compared with RM25.8 million a year ago. Revenue grew to RM295.4 million from RM279.2 million. 

Heng reckons that most Malaysian semiconductor players might have already pared down their inventories.

When asked about the industry outlook, Heng said he expected a gradual recovery. “I think 2013 will see a better performance for most Malaysian semiconductor and electronics companies.”

Semiconductor Equipment Manufacturers’ Industry Association, the global trade association announced on March 21 that the North American semiconductor equipment industry had posted a book-to-bill ratio of 1.14 in January this year, indicating potential growth for the global semiconductor industry.

The book-to-bill ratio has been below one for the past eight months before improving to 1.14 in January this year. A book-to-bill ratio of above one indicates strong demand, while a ratio below one implies weaker demand.