Globetronics’ q-o-q prospects looking up as demand strengthens
KUCHING: Globetronics Technology Bhd’s ( Globetronics) quarter-on-quarter (q-o-q) growth is expected to remain strong as analysts expect demand for the company’s products to remain solid until year-end.
In a report, the research arm of Maybank Investment Bank Bhd (Maybank IB Research) pointed out that the commercialisation of the light sensors in a major North American smartphone model, launched in September 2017, lifted Globetronics’ quarterly revenue back to 2015’s levels (more than RM80 million) and its third quarter of 2017 (3Q17) earnings to RM14 million (a 141 per cent q-o-q increase, 57 per cent year-on-year increase).
“We expect the q-o-q strength to persist into 4Q17 to cater for the initial demand of that newly- launched smartphone,” it opined.
Nonetheless, it said, volume loading may taper in 1Q18 due to slower- than- expected response for the two lower-end smartphone variants alongside a limited supply for the high-end variant (capped by certain component supplies).
It further pointed out that soft demand might result in a production cut by 2Q18.
It also highlighted that pressures on its key client migth weigh down Globetronics.
It epxlained, despite much stronger quarterly revenue (a 45 per cent q-o-q increase, 79 per cent y-o-y increase to 263 million euros), Globetronics’ Singaporean-based sensor customer, AMS AG’s headline earnings only hit 20 million euros in 3Q17, narrowing 9M17 losses to 14 million euros (versus 89 million euros profits in 9M16).
“Losses from severe gross profit margin compression (down 16.4ppts to 37 per cent in 9M17) alongside stress on ams AG’s balance sheet (100 per cent net gearing as at end- September 2017) may eventually put pressure points on its suppliers, Globetronics being one of them.
“Amid higher volume loading, costdown pressures may also be present. Taking this into account, we lower overall sensor average selling price forecasts by six to seven per cent leading to lower FY17 to FY19E core net profit by five to eight per cent,” Maybank IB Research said.
All in, the research team pegged a ‘sell’ call on the stock.
It explained, “Top- end of consensus FY18E net profit remains at RM121 million (compared with low-end of RM59 million) despite disappointment from the gesture sensor which was not bundled into the recent North American smartphone launch. For this, we see risk in consensus expectations for FY18.” THE Malaysian rubber market closed mostly higher yesterday in line with the performance of regional rubber futures markets, a dealer said.
Firmer crude oil prices coupled with the affordable ringgit lent support to the rubber market.