Globetronics 1H16 results below expectations

KUCHING: Globetronics Technology Bhd’s (Globetronics) first half of 2016 (1H16) earnings came in below analysts’ expectations.

In a filing on Bursa Malaysia, Globetronics announced that for the period under review, the group recorded a revenue and net profit of RM116.1 million and RM10.2 million as compared to RM177.7 million and RM35.1 million respectively in the corresponding period last year (35 per cent and 71 per cent decrease respectively).

According to the research arm of MIDF Amanah Investment Bank Bhd ( MIDF Research), the lower second quarter of 2016 (2Q16) normalised earnings led to lower 1H16 normalised earnings of RM13.4 million (down 58.9 per cent y- o-y).

“This came in severely belowour and consensus expectations, accounting for merely 28.2 per cent and 28.6 per cent of financial year 2016 (FY16) full year earnings estimates respectively,” it said.

MIDF Research revised downwards Globetronics’ FY16 and FY17 earnings by -34.3 per cent and -36.7 per cent respectively.

The research arm’s earnings revision was premised on lower volume loading and lower operating profit margin.

Following its earnings downgrade, MIDF Research revised its target price downward to RM3.07 per share from RM4.07 per share previously based on dividend discount model ( DDM) valuation methodology.

“Note that we also update the group’s beta to 0.98 from 0.70,” it said.

MIDF Research was perturbed with the soft volume loading of Globetronics’ products which is expected to prolong throughout 2H16.

The research arm highlighted that this will adversely impact the group full year FY16 earnings outlook.

“Moreover, we are sceptical on the possibility of volume ramp up for the new sensors components in early 3Q16,” it said.

“We view the mass production of the new sensors components could only be seen towards the end of 1H17 to cater for smartphone launches next year.”

All factors considered, MIDF Research maintained its ‘neutral’ recommendation on Globetronics.