Globetronics’ 1HFY13 results were within our expectations, with net profit of MYR24.3m accounting for about 48% of our FY13F target. Y-o-y,  1HFY13  net  income  surged  53%  on  the  back  of  a  29%  y-o-y  jump  in  revenue.  EBIT  margin  improved  to  16.9%  from  14.7%  in  1HFY12, underpinned  by a  better product mix, economies of scale achieved across most of  its product segments and higher volume  loadings from most of its customers. As at end-June, the Company is in a net cash position, with net cash per share of MYR0.48. We leave our forecasts unchanged, but lift our dividend payout projection to MYR0.16 (FY13F) and MYR0.18 (FY14F), which translates into decent dividend yields of 6.2% and 6.9% respectively. Maintain BUY with a FV of MYR3.00, pegged to a higher target P/E of 13.0x. 
 
1HFY13  net  profit  surged  >50%  –  in  line.  1HFY13  results  were  in  line  with  our  expectations,  with  net  earnings  of  MYR24.3m  accounting  for about 48% of our full-year target. 1HFY13 net profit surged 53% y-o-y from MYR15.9m in 1HFY12, on the back of MYR162.8m in revenue – a 29% increase y-o-y. The higher bottomline was largely due to margin improvement; EBIT margin increased to 16.9% in 1HFY13 from 14.7% in 1HFY12 as a result of a shift in product mix to higher  margin  products. Globetronics’ 1HFY13 effective tax rate of 15.7% was also lower than 1HFY12’s 18.4%, which was partly contributed by the Company’s 10-year pioneer status for its development of proximity sensors.   
 
Better q-o-q results on higher volume loadings. Globetronics reported strong q-o-q results, with revenue of MYR85.5m (+23% y-o-y; +10% q-o-q)  and  net  income  of  MYR14.1m  (+46%  y-o-y;  +39%  q-o-q).  This  was  primarily  due  to  higher  volume  loadings  from  its  key  clients.  The Company managed to increase its production of timing and quartz devices at its Sungai Way plant to about 110m-120m units per month from about 60m units per month in FY12. Nevertheless, we are expecting a set of flat q-o-q results in 3QFY13, largely due to shorter working days in August as a result of the Hari Raya festivities and other holidays.  

Bright prospect ahead.  Going forward, we are upbeat on contributions from its timing and quartz crystal devices segment, LED components and sensors manufacturing. These three segments contributed to over 80% of its total sales in 1HFY13. Globetronics has been ramping up its production to cater for higher orders. Its timing and quarts devices production capacity has been ramped up to close to 134m units per month in June from about 120m units per month in 1QFY13. The Company is also targeting to produce 450m-460m dies per month to cater to orders from its main customer – Osram. In addition, it has been granted a 10-year pioneer status for the development of its proximity sensors and is also trying to obtain grant income from the Malaysian Investment Development Authority (MIDA).   
 
Maintain  BUY,  RM3.00  FV.  We  are  leaving  our  forecast  unchanged,  but  are  lifting  our  dividend  payout  projection.  The  company  has  been distributing  attractive  dividends  given  its  favourable  net  cash  position.  The  Company  has  further  enhanced  its  balance  sheet  with  no borrowings and a total cash pile of MYR131.0m (net cash per share of MYR0.48).  We are expecting a total dividend of MYR0.16 and MYR0.18 for  FY13F  and  FY14F  respectively  on  the  back  of  the  stronger  earnings  visibility.  These  will  translate  into  a  dividend  yield  of  6.2%  and  6.9% respectively. All in, we maintain our BUY call, with a higher FV of RM3.00, pegged to a higher target P/E of 13.0x against previous P/E of 12x. We  deem  the  targeted  P/E  of  13x  is  fair  which  is  slightly  above  its  5-year  average  P/E  of  12x.  Earnings  growth  is  strong  against  its  current valuation as 3-year P/E-to-growth (PEG) remained low at 0.4x.  
 

Source: RHB