Thursday 28 Mar 2024
By
main news image

This article first appeared in The Edge Financial Daily, on May 6, 2016.

 

GEORGE TOWN: Globetronics Technology Bhd’s main challenge this year is having excess capacity due to slower orders. The Penang-based firm has to ensure its production is at an optimal level amid the slowdown in the smartphone and tablet industry.

Corporate manager Ng Kok Yu said the company is hoping that things would look up in the second half of financial year 2016 (2HFY16), after a substantial 78.5% fall in quarterly profit to RM3.68 million in the first financial quarter ended March 31, 2016 (1QFY16). Its revenue shrank 33.8% to RM58.74 million.

“For 2HFY16, we are moving into the areas of imaging, gesture and health sensors that are targeted for smartphone and tablet devices, as well as the Internet-of-Things arena,” Ng, the son of Globetronics founder and executive chairman Michael Ng Kweng Chong, told The Edge Financial Daily after Globetronics’ annual general meeting yesterday.

He said the sensors segment will remain as the company’s key contributor. Ng said the sensors division, which contributed about 30% of its revenue in 1QFY16, along with its quartz timing devices division, which contributed 38%, will continue to be its two main revenue drivers.

The company’s largest customer for its sensors division is headquartered in Switzerland. The end applications of the products eventually go into smart devices, such as phones and tablets.

Affin Hwang Capital in a recent research note cautioned that volumes of Globetronics’ imaging and gesture sensors had yet to pick up, with volume visibility at the two million units per month range in June, which is below the installed capacity of 20 million units per month.

The research firm added that the low volume could indicate the new smartphone model slated for launch this year will only bear minimal changes, and most of the upgrades will occur to the 2017 model instead.

On this, Ng said mass production for the new components would continue, but acknowledged that the volume will not be as big as initially projected.

“At the moment, we will start [on a low base] in June, with one million pieces each for imaging and gesture sensors, and based on forecasts, this could go up to three million pieces each in 3QFY16.

“These are the forecasts given by our customers, but if you are trying to tie these numbers, to let’s say a particular [smartphone] model launch [this year], it doesn’t look like it can be incorporated at this level, and I believe that led to some analysts downgrading the company based on the volume forecasts provided,” said Ng.

As for the health sensor, Ng said it is targeted to go into mass production in 4QFY16.

“It will start at one million units per month and [be] ramped up further later,” he said.

“The light-emitting diode (LED) segment is also gaining some traction. It contributed 25% of our revenue in 1QFY16, from about 20% last year, and across the board we are seeing customers such as Cree Inc, Osram and SORAA showing new volume loadings with us.

“The growth in the LED segment is surprising to us as previously the segment was facing hurdles, such as price erosion and excess capacity. We believe its growth could also provide an offset for the sensors segment, which is expected to have a soft first half in terms of revenue contribution,” said Ng.

Globetronics’ share price has taken a beating after the release of its lacklustre 1QFY16 results. The stock has been on a downward trend since April 22, when it was trading at RM5.29. It slid to a two-year low of RM3.12 on Wednesday before recovering slightly. The decline of about 40% in its share price wiped out over RM585 million in market capitalisation.

      Print
      Text Size
      Share