• Business profile - Globetronics Technology Berhad is engaged in the manufacture, assembly, testing and sales of integrated circuits, chip carrier quartz crystal products, optoelectronic products, printed circuit boards, electrostatic discharge protective materials, small outline components, technical plating services and packaging materials for the semiconductor and electronics industries.
• Sharp drop in share price was overdone – share price tumbled almost 30% within 4 trading days, mainly due to its weak quarterly result which was released on 26 Apr. The company’s 1Q net profit declined by 78.55% yo y as a result of lower demand from end customers, as well as a forex loss of RM4.6m. From technical perspective, the sharp decline in share price was oversold, in our view, as yes terday’s small Doji candlestick signaled to aggressive traders that the sharp downtrend could be over and that short positions could potentially be covered. Hence, we recommend a TRADING BUY on GTRONIC, with technical upside resistances of RM4.16, RM4.38 and RM4.57 (long-term objective). Immediate supports are at RM3.80 and RM3.72. Cut loss below RM3.67.
• Attractive risk to reward ratio with 17% upside against 5.9% downside. We see a good risk to reward ratio for investor with a theoretical entry price of RM3.90 given that the downside to the cut loss zone of RM3.67 is 23 sen (-5.9%) while the upside to the LT target of RM4.57 is 67 sen (+17%).

Source: Hong Leong Investment Bank Research - 28 Apr 2016