KUALA LUMPUR (May 3): Shares of Globetronics Technology Bhd fell more than 8% in Wednesday’s (May 3) morning trade after its dismal results for the first quarter ended March 31, 2023 (1QFY2023), prompting some analysts to cut their target prices and earnings forecasts.

However, by market close, its losses were pared to six sen or 5.45%, the counter ending at RM1.04 which translates into a market capitalisation of RM696.22 million. Trading volume amounted to 4.52 million shares, more than three times Tuesday’s trading volume of 1.3 million shares.

The counter has fallen 9.57% year to date and 22.96% over the past year. Analysts have five 'hold', two 'sell' and two 'buy' ratings with a consensus target price (TP) of RM3.11, according to Bloomberg data.

Globetronics posted a 65.08% drop in 1Q net profit to RM3.3 million from RM9.45 million, while revenue fell 22.67% to RM33.13 million from RM42.84 million in the same quarter a year earlier due to lower volume loadings or production units from its customers, followed by higher tax expense and foreign exchange (forex) losses.

RHB Research and AmInvestment Bank Bhd have trimmed their TPs and earnings forecasts for the stock.

RHB trimmed its TP to RM1.01 from RM1.05 and maintained its 'neutral' recommendation for Globetronics. AmInvestment Bank Bhd, which retains its 'hold' rating for the counter, reduced its TP by 11.61% to 99 sen from RM1.12.

RHB Research's earnings forecasts are lowered by 39.5%, 16.6% and 12.1% as the research house factors in the lower run-rate and margin assumptions. “We slash our forecasts accordingly to reflect the prolonged demand softness despite the expectation of earnings improvements in the quarters ahead in tandem with the seasonally stronger second half (2H), given the smartphone cycle ramp-up. We still see FY2023 as a consolidation year.

“The volume loadings for both the gesture and light sensors are set to be flattish — only marginally higher into 2Q from 17-20m currently. Meanwhile, volumes for quartz crystal timing devices show further weakness along with LED and other integrated circuits or ICs. [Note that] the ramp-up of the new generation of gesture and light sensors are likely in June-July,” said the research house in a note.

Meanwhile, AmInvestment slashed its FY2023 to FY2025 earnings by 20% to 51%, assuming more conservative sales estimates, after the group’s 1Q results fell short of expectations.

“The stock looks unattractive at the current level of 17x FY24F PE (near its five-year mean), above its five-year mean of 16x PE. Nevertheless, it offers a decent FY2024F dividend yield of 5%,” it said.

While the remainder of F20Y23 is expected to continue to be challenging, AmInvestment said the group has several projects in the pipeline that could help its earnings to recover on top of the broader market turnaround.

“The group is in the midst of co-developing next-generation sensors with one of its customers. Globetronics also continues to actively engage with potential new customers as part of its FY2024 growth plan,” it added.

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