Investment Highlights

• We upgrade our recommendation on Globetronics Technology (Globetronics) to BUY from HOLD after the recent decline in its share price. We maintain our forecasts and fair value of RM2.84/share, pegged to an FY22F PE of 24x. We have also ascribed a 3-star ESG rating to the company (Exhibit 3).

• Via our channel checks, we believe that the key sensor customer’s qualification programmes for the next generation of light and gesture sensors have not been halted and mass production is still set for June 2021 and July 2021 respectively as planned.

• We do note that forecasts could change in the case of any changes in end-customer demand, but we believe that demand for its end-customer’s products would remain strong despite potential supply chain issues relating to the global chip shortage.

• Establishment of cloud-based platform for Industry 4.0 integration: The group will spend RM50.2mil over three years to establish a cloud-based platform, incorporating Industry 4.0 (IR4.0) applications such as artificial intelligence, big data, and augmented and virtual reality to its operations. The platform would enable GTB to reach higher levels of customization, shorter production times and improve product quality.

• According to theedgemarkets.com, the platform will prepare for the next-generation semiconductor wafer-level packaging technology, including the 2.5D, where the stacking of dies will be replaced by flip-chip on a silicon interposer.

• We keep our FY21F capex assumptions unchanged and note that the pilot lines would be subject to customers’ qualification.

• Following the decline in share price, we believe GTB is undervalued and that investors should take advantage of this correction to accumulate the stock.

• 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 - 22 Apr 2021