Investment Highlights

• We maintain our HOLD call on Globetronics Technology (GTB) with unchanged forecasts and fair value of RM2.84/share, pegged to an FY22F PE of 24x.

• Key highlights from GTB’s 4QYF20 conference call:
  • Results summary: GTB’s FY20 core profit of RM49mil rose 10% YoY due to higher volume loading seen for certain customers i.e. from the sensors and quartz crystal timing device (QCTD) division which led GP margin to improve to 38% (vs. 34% in FY19. 4QFY20 core profit and revenue both fell by 4% due to lower volume loading for certain customers especially in December 2020 amid a 4– 5 day year-end factory shutdown.
     
  • 1QFY21 outlook: Light sensor volumes remained steady at 30mil units/month as at Jan 2021 but will decline by 15% in Feb and Mar 2021 due to the shorter month and shutdown for Chinese New Year festivities. Gesture volume stands at 35mil units/month while motion sensor volumes remain stable at 5.5mil units/month. Overall sensor volumes remain positive. Meanwhile, QCTD volume is expected to remain flattish. On the plus side, GTB has seen a small improvement in volume loadings for its production of power lighting products, which are expected to be a key focus for FY21.
     
  • Key updates: Mass production of the next generation light and gesture sensors is targeted for May/June 2021. The group has set aside ~RM50mil capex for FY21, for its 30K sqft factory expansion which is ongoing and is targeted to be completed in August/Sept 2021 while the remainder will be spent on equipment and machinery.
     
  • 2021 plans. The group is co-developing new generation sensors from its key Austrian customer and developing a new key programme with other sensor customers. However, progress with the other customers has been hampered by Covid-19 travel restrictions due to delay in site qualification. GTB is also making progress on the qualification of more power lighting products under its LED product segment.

• We continue to like GTB but believe that its prospects are fairly valued. GTB’s positive prospects arise from: (i) its strength in smart sensors with new generation sensor demand expected to drive growth ahead; (ii) ramp-up in laser automotive headlamps to boost LED/SSD segment; and (iii) potential opportunities to be secured from the US-China trade war that could lead to customer diversification and revenue enhancement.

Source: AmInvest Research - 1 Mar 2021