Globetronics top loser after downgrade

Date: 13/09/2017

Source  :  MAYBANK
Stock  :  GTRONIC       Price Target  :  5.80      |      Price Call  :  SELL
        Last Price  :  2.54      |      Upside/Downside  :  +3.26 (128.35%)
Source  :  DBS VICKERS
Stock  :  GTRONIC       Price Target  :  7.65      |      Price Call  :  BUY
        Last Price  :  2.54      |      Upside/Downside  :  +5.11 (201.18%)

KUALA LUMPUR: Globetronics Technology's share price fell to a low of RM6.30 on Wednesday after it was downgraded to a sell as  the launch of the Apple smartphone did not feature the bundling of premium wireless earphones in any of the three new smartphone variants. 

At 2.43pm, it was down 23 sen to RM6.34. There were 2.09 million shares done at prices ranging from RMN6.30 to RM6.55.

The FBM KLCI fell 1.21 points or 0.07% to 1,788.65. Turnover was 1.69 billion shares valued at RM808.29mil. There were 308 gainers, 348 losers and 471 counters unchanged.

At the current price, it is trading at a price to earnings of  65.63 times and its estimated forward P/E for FY17 is 29.35 times.

Maybank Investment Bank Research cut Globetronics to a Sell and lowered its target price to RM5.80 from RM6.40 as the wireless earphones were not included in new smartphone

The research house described it as a disappointment it had previously expected the new high-end smartphone variant would be bundled with premium wireless earpiece. 

“For this, we cut FY17-19 net profit forecasts for Globetronics by 9%-13% after revising down gesture sensor volumes. 

“Correspondingly, our target price was lowered to RM5.80 (-9%), pegged on unchanged 18 times CY18 price-to-earnings ratio (PER). With 12% downside, the stock is now a Sell,” it said.

Maybank Research cut volume estimates for gesture sensor by 33%-40% (to 84 million/120 million/ 144 million in FY17/18/19, from 126 million/180 million/240 million).

It said this was having accounted for (i) the absence of bundling of wireless earphones to the high-end variant of the smartphone but partially cushioned by (ii) higher sales of the wireless earpiece by itself from a likely introduction of the second generation wireless earphonein 2018. 

“We have previously cautioned that consensus has been too optimistic in their estimates for the demand of gesture sensors which may have assumed the bundling of wireless earphones for up to all three variants of the new smartphones. 

“We believe this reality would likely translate to downgrades in forward earnings for Globetronics; top-end of FY18 consensus net profit currently stands at MYR121m vs.our before-revision RM101mil,” it said.

However, DBS Vickers has a Buy call on Globetronics with a target price of RM7.65.

Affin Hwang Capital Research and UOB Kay Hian Research also had earlier buy calls ar RM8 and RM7.50.

Meanwhile, Bloomberg reported shares of Apple Inc.’s suppliers across Greater China greeted the company’s latest product line-up, including its most-expensive ever iPhone, with losses.

While there were a few exceptions, the lack of any major surprises in Tim Cook’s much-anticipated unveiling weighed on stocks from Taiwan’s Pegatron Corp., an iPhone assembler, to South Korean screen-maker LG Display Co.

Hong Kong-listed Cowell e Holdings Inc. -- a maker of iPhone cameras that derives about 81% of its revenue from Apple, according to data compiled by Bloomberg -- tumbled as much as 6.6%, while Taiwan’s Catcher Technology Co. slid the most since November. 

Catcher makes metal cases used in laptops and smartphones, and the new iPhones have glass cases, said Allan Lin at Concord Securities Co.

Bloomberg also reported Quanta Computer Inc., assembler of the Apple Watch, got a boost though, along with Hong Kong’s AAC Technologies Holdings Inc., which Jefferies Group noted should benefit from an upgrade to iPhone sound functions and the removal of the home button.

Read more at http://www.thestar.com.my/business/business-news/2017/09/13/globetronics-top-loser-after-downgrade/ 


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