(Oct 30, RM4.23)
Maintain neutral with target price of RM4.75: Globetronics’ net profit for the first nine months ended September of financial year 2014 (9MFY14) rose 24% year-on-year (y-o-y) to RM49 million. This accounted for 77% of our and 76% of consensus’ estimates for FY14. Profit before tax for the period improved 26% y-o-y to RM60 million while earnings before interest and taxes (Ebit) margins rose 22% vis-à-vis the first half of FY13’s 19% on: (i) higher sales from most of its customers; (ii) greater economies of scale; and (iii) improved productivity and cost controls. Revenue for the third quarter (3Q) of FY14 was flat at RM91 million, while net profit was marginally higher by 2% at RM18 million. As at end-September, Globetronics had total net cash of RM144 million, equivalent to 52 sen per share.
Despite the anticipation of a softer 4Q, which is historically a soft quarter in any year, Globetronics guided that it is on track to deliver a set of solid earnings in FY14. It said its timing sensor business would be its earnings growth driver going forward and that prospects would be underpinned by healthy volume loadings for most of its products.
The company said its monthly volume for its crystal quartz timing devices has increased to 150 million units per month in 3QFY14 from about 140 million units in 2Q, attributing this to higher demand from China-brand smartphone makers.
On new product development, we think there will be more meaningful contributions coming in by FY15, as 4QFY14 will be only the beginning stages of production.
With results largely in line, we make no changes to our full-year forecasts. Maintain “neutral” and target price of RM4.75, which is pegged to an unchanged 17 times FY15 target price-earnings ratio. — RHB Research, Oct 29
This article first appeared in The Edge Financial Daily, on October 30, 2014.