Globetronics on hold call until rerating in 4Q16 for clearer signs of growth
KUCHING: Long term prospects of Globetronics Technology Bhd (Globetronics) are uncertain following a weak first half of the 2016, forecasts from the research arm of AllianceDBS Research Sdn Bhd (AllianceDBS Research) that Globetronics’ status is currently maintained on hold.
Despite a weaker performance, the research arm believed that the weak 2Q16 results were within their expectations as Globrtronics’ management had adequately guided for a decrease in volume loadings for its sensor division.
“Production volume for proximity sensors was roughly 10 million units per month in 2Q16 compared to 13 million units per month in 1Q16. This is implying a relatively poor utilisation rate of 45 per cent,” said the research arm.
The reduced production for proximity sensors is of concern for investors as it entertains the possibility of Globetronics and its Swiss customer may lose the socket to other suppliers.
However, the research arm believes that this possibility is highly unlikely due to rumours regarding an enhanced proximity sensor being planned for the 2017 model,andanongoingcollaboration between Globetronics, its Swiss customer, and Austria Microsystems on the 2017 model.
One upside risk for the group is the revenue Globetronics’ gesture sensor will bring in. However, the research arm has not factored this into their earnings forecast as production of the gesture sensor has yet to reach mass production.
Another upside risk is potential increases in the proximity sensor volume in 2H16 which would increase earnings of GTB. However, the research arm has stated they believe that this would be a mere representation of normalisation in earnings and a small relief for investors.
In terms of timing, the research arm has indicated that they believe 4Q16 would be the best time to take a look at the stock again as all aforementioned concerns and up risks would have bee realised by that quarter, allowing the research arm to better re-rate its stock.