Globetronics to boost sensor unit

PETALING JAYA: Globetronics Technology Bhd is expected to increase its capital expenditure (capex) for this year to RM103mil from RM80mil, said Affin Hwang Capital Research.

The research house also said the pioneer tax status for Globetronic’s sensor division has been extended for another five years.

Affin Hwang said Globetronics’ higher capex would raise the installed capacity for its sensor business from 45 million units to 58 million units a month.

It said the bulk of the expansion is for the light and gesture sensors, which should see capacity rise from seven million to 13 million units for the light sensors.

As for the gesture sensors, the capacity will increase from 30 million to 37 million units per month.

The new equipment will be progressively turned on from mid-October and should be fully installed by end-October.

“In terms of utilisation, the sensor division is operating close to 90% utilisation and we understand that visibility for these volumes will hold up into the first quarter (Q1) of 2018.”

The research house said Globetronics’ sensor production output ranged between 20 million and 30 million units per month for July to September.

“This is a sharp increase (two to three-fold increase) over the average eight to 10 million units per month in Q1-Q2 2017, providing scope for a significantly better Q3 2017, both on a quarter-on-quarter and year-on-year basis,” it said in a report.

Affin Hwang has lowered its average selling price assumption for the sensor division.

However, it has raised its earnings before interest, tax, depreciation and amortisation margin forecast to take into account the higher contribution from the sensor business, which is estimated to rise from 42% of revenue in 2017 to 60% in 2018.

“Combined, this leads to a 22% cut to our 2017 estimated earnings per share (EPS). Our 2018-2019 estimated EPS are trimmed slightly by 0.4% and 2.3% respectively.”

The research house has maintained its “buy” call and target price of RM8 (based on 20 times 2018 EPS).

“Our 2017 dividend per share forecast is also trimmed to 16 sen from 24 sen to account for the higher capex and lower earnings.

“The projected payout ratio is nevertheless still high at 75% of 2017 estimated earnings but we expect this to revert to the 90% level in 2018-2019.”

It said its underlying thesis for the stock remained based on its strong earnings recovery and solid growth prospects as it leveraged on its Austrian customer.

“Key risks to our call would be a loss of customers and a significant decline in sensor volumes,” said the research house.