Globetronics’  MYR49m  9M14  core  earnings  were  within  our/street estimates at 77%/76% of  FY14  forecasts respectively.  With the results largely  in  line,  we  maintain  our  full-year  forecasts,  NEUTRAL  call  and MYR4.75 TP (a 12% upside),  pegged to an unchanged 17x FY15 target P/E.  Going forward, Globetronics’  prospect are  underpinned by healthy volume loadings for most of its products. 

Within  expectations.  Globetronics  Technology’s  (Globetronics)  9M14 net profit rose 24% YoY to  MYR49m. This accounted for about 77% and 76%  of  our  and  consensus’  FY14  estimates  respectively.  PBT  for  the period under review improved 26% YoY to MYR60m while EBIT margins rose  22%  vis-à-vis  1H13’s  19%  on:  i)  higher  sales  from  most  of  its customers,  ii)  greater economies of scale,  and iii)  improved productivity and cost controls. 3Q14 revenue was flat, though, at MYR91m, while net profit was marginally higher by 2% to  MYR18m. As at end-September, Globetronics  had total net  cash of MYR144m, equivalent to 52 sen per share.

Prospects  remain  intact.  Despite  the  anticipation  for  a  softer  4Q14, which is  historically a soft quarter in any year, Globetronics guided that it was  on track to deliver a set of solid earnings in FY14.  It  said its  timing sensor business  would be its earnings growth driver going forward  and that  prospects  would  be  underpinned  by  healthy  volume  loadings  formost of its  products.  The company  said that its monthly volume for  its crystal quartz timing devices have increased to 150m units per month in 3Q14 from about 140m units in 2Q14,  attributing this  to higher demand from China brand smartphone makers. On new product development, we think  there will be  more meaningful  contributions  coming  in by FY15, as 4Q14 will only be the beginning stages of production.

Maintain NEUTRAL and MYR4.75 TP. With Globetronics’ results largely in  line,  we  make  no  changes  to  our  full-year  forecasts.  Maintain NEUTRAL  and  MYR4.75  TP,  which  is  pegged  to  an  unchanged  17x FY15 target P/E. At current prices,  the stock  still offers a decent FY14F and FY15F net dividend yield of 4.7% and 5.2% respectively.

Source: RHB