Results: Globetronics Technologies (GTB MK; BUY; TP: MYR7.35) - Let the good times roll

Globetronics Technologies (GTB MK; BUY; TP: MYR7.35) – Let the good times roll

• No surprises. 3Q15 net profit of MYR21m (+14% QoQ, +16% YoY) took 9M15 earnings to MYR56m (+13% YoY), meeting 73%/72% of our and consensus full-year forecasts – in line. Despite flat QoQ revenue, 3Q15 bottomline improved by 14% QoQ as operating margins expanded 1.4ppts QoQ from (i) favourable USD exposure and (ii) better operating efficiencies. Lower tax expense (-41% QoQ) due to higher contribution from the tax-exempted sensor division (revenue: +5% QoQ) also lifted earnings.
• Our forecasts are unchanged. We expect 4Q15 results to be marginally stronger QoQ backed by maiden contribution of the new 3D-imaging sensor product in late-4Q15 for its Swiss customer. Meanwhile, growth in 2016 will be driven by the full-year contribution for its 3D-imaging sensors.
• Why do we like this counter? We like Globetronics for its (i) impeccable profit track record, (ii) strong ability in securing new customers/products outsourcing contracts and (iii) positive exposure to the stronger USD/MYR forex. Net cash continues to strengthen to MYR175m at end-3Q15 (vs MYR162m end-2Q15), translating into an ex-cash FY16 PER of just 12.7x. Reiterate BUY with 20% upside to our TP of MYR7.35, supported by 6.4% FY16 yield.