Globetronics’ sales recovery to be seen from 2Q17 onwards

KUCHING: Globetronics Technology Bhd’s (Globetronics) first quarter of 2017 (1Q17) earnings were within expectations, with analysts now projecting that the group’s sales recovery is likely to be seen from 2Q17 onwards.

In a filing on Bursa Malaysia, Globetronics reported that for the three months ended March 31, 2017, the group recorded a revenue and net profit of RM49.8 million and RM4.7 million as compared to RM58.7 million and RM3.7 million respectively in the corresponding period last year.

Globetronics’ 1Q17 normalised earnings account for 12 per cent and 8.1 per cent of the research arm of MIDF Amanah Investment Bank Bhd’s (MIDF Research) and consensus’ earnings estimates respectively.

Despite the subdued quarterly performance, this came in within MIDF Research’s expectation as the research arm expected much stronger volume loading in 2Q17 and 3Q17, which will significantly boost the group’s topline contribution.

On forecasts, MIDF Research maintained its financial year 2017 (FY17) earnings estimate at this juncture.

However, the research arm raised its FY18 earnings estimate by nine per cent as it assumed a higher revenue contribution from the sensor division.

As for dividends, the group declared a total dividend of 23 sen per share for FY16 which was above MIDF Research’s expectation of 21 sen per share.

In view of this, the research arm raised both FY17 and FY18 dividend estimates to 23 sen per share.

MIDF Research rolled forward its valuation base year to FY18 and derived a new target price of RM5.32 per share based on dividend discount model (DDM) valuation methodology.

The research arm was rather perturbed with the soft volume loading of Globetronics products since 2016.

“Moreover, we reckon that the mass production of new sensors components could only be seen by 2Q17 to cater for new smartphone launches in 3Q17.

“Nonetheless, we view that the stock has an attractive dividend yield of at least four per cent,” it said.

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