MIDF Sector Research

Author: sectoranalyst   |   Latest post: Wed, 20 Nov 2019, 9:42 AM


Globetronics Technology Berhad - Diversification Initiatives Yet to Yield Desired Results

Author:   |    Publish date:


  • Decline in volume loadings lead to -13.8%yoy drop in 2QFY19 normalised earnings
  • 1HFY19 normalised earnings of RM11.0m (-55.3%yoy) came in severely below ours and consensus expectations
  • Low volume loadings expected persist leading to dismal FY19 earnings performance
  • Downgrade to SELL with a revised target price of RM1.47

Quarterly earnings weaker than anticipated. Globetronics Technology Bhd (GTB) 2Q19 normalised earnings declined by - 13.8%yoy to RM7.4mm. The decline in earnings was mainly attributable to drastic decline in volume loadings from certain customers in the group.

1H19 earnings came in below expectations. The dismal 2QFY19 financial performance led to 1HFY19 normalised earnings of RM11.0m. This represents a reduction of -55.3%yoy. This was primarily premised on phased out of certain matured products of a Japanese customer and lower volume loadings for products related to the smartphone market. All in, 1H19 normalised earnings failed to keep pace with ours and consensus expectations, accounting for 19% and 18.3% of FY19 full year earnings estimates respectively.

Impact on earnings. We are lowering our FY19 and FY20 earnings estimates to RM48.8m and RM56.1m respectively as we are lowering the production volume assumptions from across all its major products offering.

Target price. We are deriving a revised target price of RM1.47 (previously RM1.76) based on DDM valuation methodology.

Downgrade to SELL. The soft volume loadings continue to negatively impact the group’s well-being as seen in 1HFY19 financial performance. While we expect some earnings recovery in 2HFY19, we opine that it would be insufficient to make up for the underperformance seen in 1HFY19. While we acknowledged the group’s effort to diversify away from the smartphone market, we are of the view that meaningful contribution to the bottomline can only be seen in the later part of FY20.

Given the poor near-term outlook, we expect the share price to come under great pressure. Moreover, we believe the estimated dividend yield of 3.5% to 4.0% is unable to make up for the anticipated retracement in share price. All factors considered, we are downgrading our recommendation to SELL from NEUTRAL previously.

Source: MIDF Research - 1 Aug 2019

Share this

Related Stocks

Chart Stock Name Last Change Volume 
GTRONIC 2.09 -0.01 (0.48%) 750,100 

  Be the first to like this.


426  261  559  762 

Top 10 Active Counters
 ALAM 0.13+0.03 
 FINTEC 0.080.00 
 ARMADA 0.545+0.015 
 TIGER 0.09+0.015 
 EKOVEST 0.815+0.035 
 SAPNRG 0.2950.00 
 DGB 0.165+0.005 
 TRIVE 0.010.00 
 HSI-H8F 0.29+0.04 
 KNM 0.41-0.015 


1. Formosa Prosonic Industries - Divesting the Last Australian Project - Solid Net Cash, Strong DY and Attractive Valuations HLBank Research Highlights
2. (Icon) Why You Should Learn To Invest In Overseas Stocks Icon8888 Gossips About Stocks
3. Dayang: Points to ponder & can you advise me? Koon Yew Yin Koon Yew Yin's Blog
4. Challenging Times for Retirees with Ultra-Low Interest Rates. BFM Podcast
5. Jaks Resources Bhd: A relook into Jaks Resources from Profitability, Volume Spread Analysis and what’s Insiders Report are telling they are doing Now? TradeVSA - Case Study
6. [12Invest] 我要投资 - 浅谈以Reverse Takeover 上市的Widad Group(0162) [12Invest] - 我要投资
7. Rohas Tecnic - More to Come HLBank Research Highlights
8. M+ Online Technical Focus - 20 Nov 2019 M+ Online Research Articles
Partners & Brokers