FW: Results: Globetronics Technology (GTB MK; HOLD; TP: MYR2.40) - Above expectations

 

 

Good morning,

 

Globetronics Technology (GTB MK; HOLD; TP: MYR2.40) - Above expectations

 

• And, earnings to be back loaded, once again. Despite 1H18 core earnings at 40% of our full-year forecast, the results are still above expectation. We expect a much stronger 2H18, fuelled by demand ramp at the sensor division in preparation for major smartphone launches in 3Q18.

2Q18 net profit of MYR9m fell by a sharper 39% QoQ (+48% YoY) than a revenue contraction of 17% QoQ as operating margin shrank by 4.6ppts QoQ. While a weaker QoQ 2Q18 was expected due to softer shipment for GTB’s light sensors (inventory rationalisation by a North American smartphone brand), we were pleasantly surprised by stronger-than-expected volumes for GTB’s proximity, wearable and gesture sensors. Alongside volume recovery for light sensors in preparation for major smartphone launches due out in Sep 2018, we expect GTB’s sensor revenue to pick up strongly from early 3Q18 onwards.

• Raising FY18/19/20E earnings by 9%/4%/2%. We make upward adjustments in our proximity and wearable sensor volumes to incorporate strong 1H18 volume shipments. Besides that, we also raise our gesture sensor volumes, incorporating capacity expansion undertaken by GTB as required by its key sensor client, ams AG (AMS SW, Not-rated). From these adjustments (refer to Fig 4), we now expect GTB’s 2H18 earnings to jump by 63%-83% HoH to ~MYR40m-45m; recall that 2H17 earnings surged 2.7x HoH to MYR39m. Correspondingly, our TP is raised by 4% to MYR2.40, pegged on unchanged 18x CY19 EPS (average PER targets for tech stocks within our coverage). Maintain HOLD.
• Valuations are fair. Despite our earnings upgrades, risk-to-reward for GTB remains balanced at 19x CY19 PER (18x ex-net cash of MYR96m as at end June 2018). Future catalyst  may come from mass adoption of new sensors by its key client or breakthrough in laser technology for automotive lighting.

 

Other news: Apple also released their results yesterday and here’s some snapshot of its geographical and volume sales breakdown and ASP trends by product; results were slightly above consensus according to new reports but it’s just neutral to us and our tech coverage exposed to Apple. What excited the market was Apple’s forward guidance of USD60-62b in 4QFY9/18 which is also slightly above street’s expectations.

Link to Apple’s 3QFY9/18 results: https://www.apple.com/newsroom/2018/07/apple-reports-third-quarter-results/

Apple results commentary: https://www.benzinga.com/pressreleases/18/07/b12112016/apple-reports-third-quarter-results

 

 

 

 

 

 

Regards,

Ivan Yap | Analyst, Equity Research

Level 7, Tower C, Dataran Maybank, 1, Jalan Maarof, 59000 Kuala Lumpur, Malaysia

Tel: 03 2297 8612 | Fax: 03 2284 2137 | Email: ivan.yap@maybank-ib.com

 

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