Globetronics’ outlook improving as demand recovers

KUCHING: Globetronics Technology Bhd’s (Globetronics) prospects are expected to improve as demand recovers on the back of the launch of new smartphones and potentially new wireless headsets, analysts observed.

In a report, the research team at Affin Hwang Investment Bank Bhd (Affin Hwang) said: “With strong anticipated demand for its end customer’s new smartphones and potentially attractive bundling strategies for their wireless headsets, there could potentially be upside risk to the sensor forecasts going into 2021.”

As such, it raised its 2021 to 2022 earnings per share forecast by 15 to 18 per cent as it takes into consideration the current excitement over the new phone.

“Our forecast has however yet to incorporate any new sensor design wins into the 2021 smartphone models. Contribution from the automotive laser light business should also gather pace in 2021 as constraints on raw material supply in 2020 improve,” it added.

On Globetronics’ third quarter of 2020 (3Q20) results, Affin Hwang said sensor production volumes were much higher in 3Q20, up an estimated 36 per cent quarter-on-quarter (q-o-q) and hence contributing to the better performance.

“Contribution from timing devices was also better as this business faced some challenges in 2Q20, a result of the lockdowns. Overall, core profit jumped more than four-fold q-o-q on the back of the better revenue and earnings before interest, tax, depreciation and amortisation (EBITDA) margin (up 16.6ppts qo-q),” it explained.

Despite the 29 per cent y-oy growth in sensor volumes, Affin Hwang pointed out that 3Q20 core profit was however only four per cent higher than a year ago, attributed to the lower contribution from the timing device segment and negative impact from the earlier lockdown.

Overall, the research team expected the strong 3Q20 performance to sustain into 4Q20 on seasonally stronger sensor production volumes.