Results: Globetronics Technology (GTB MK; HOLD; TP: MYR3.90) - Below expectation; D/G to HOLD

Good morning,

We have a results note on Globetronics today.

Globetronics Technology (GTB MK; HOLD; TP: MYR3.90) – Below expectation; D/G to HOLD

• Double-whammy from weaker sales and forex loss. QoQ, 1Q16 revenue fell 24% on weaker demand across the board for all products including the sensor division. Coupled with an unrealised forex loss of MYR4.2m from mark-to-market of its cash/receivables at end-Mar, 1Q16 net profit plunged 77% QoQ to just MYR3.7m.
• Cut FY16-18 earnings forecasts by 36%-52%. On the back of weaker smartphone shipment YoY in 1H16 and mass production deferment of the 3D-imaging sensor to 2017, we now expect Globetronics’ sensor volume to contract by 39% YoY in 2016; FY16 revenue to contract by 18% YoY along with other cuts. Nonetheless, we expect growth to resume in FY17/18 on mass adoption of the 3D-imaging sensor but slightly offset by a lower USD/MYR forex forecast of 3.90 average from 4.10 previously.

• Live to fight another year. Adoption of dual camera in smartphones should be more pronounced in 2017 according to Sony, a prominent global CMOS sensor supplier. As such, in 2017, we expect Globetronics to sell 200m units of the 3D-imaging sensor which equates to adoption by 100m smartphones (Globetronics’ end client sold 232m smartphones in 2015). Faster than expected adoption is a re-rating catalyst for Globetronics. HOLD for now.

Apple Inc (AAPL US; Not-rated) – Results missed street’s expectations

• Key takeaway from last night’s results (courtesy of our regional tech analyst, Warren Lau & Stefan Chang):

Apple's 2QFY9/16 result came in at marginally below our expectation but its 3QFY9/16 guidance is a big miss; Apple shares are down 8.3% now in extended trading. Sales guidance is USD41-43b, short of our preview of USD43b and Wall Street consensus of USD47.2b. Blended ASP is on a downtrend. 2QFY9/16 iPhone ASP was -7% QoQ (-2% YoY). The YoY decline is the first time YoY decline in multiple quarters, and further dilution is expected as the cheaper iPhone SE will only contribute in 3QFY9/16.

Apple supply chain should be affected negatively as the 3QFY9/16 revenue guidance suggests. iPhone shipments is tracking to our -15% YoY decline expectation for CY2016 (previously -10%). Supply chain with higher exposure to 6s could see the most downside risk: (i) Largan/AAC/Catcher all have ~50% sales exposure to Apple (ii) TSMC has ~25-30% exposure (direct + indirect), ASE has 20-30%, and USI has 50-60%. Other major names outside our coverage: Hon Hai, Pegatron, Casetek, TPK, GIS, Sony, etc.