Light-sensor headwinds to impact Globetronics in 4Q18

By DASHVEENJIT KAUR

Headwinds seen in Globetronics Technology Bhd’s light-sensor business is expected to take a toll in the company’s fourth quarter ended Dec 31, 2018 (4Q18).

Affin Hwang Investment Bank Bhd analyst Kevin Low noted that upon meeting Globetronics’ management team recently, the research arm noticed that the company’s light-sensor business is facing hiccups which could result in a flat 4Q18 compared to 4Q17.

“We now assume Globetronics’ light-sensor volume (which takes 60% of sensor production) fell to lower double-digits month-on-month (MoM) in January after a similar MoM drop in December 2018, due to soft demand for its end-customer’s products,” he noted in a company coverage last Friday.

Low added that the weak trend could continue for the remaining 18 million-19 million units in March 2019.

Despite the weaker light-sensor volume, the research firm noticed that Globetronics’ gesture sensor volume appears to be strong.

“The gesture sensor, which is designed into a wireless headset has, however, seen a stable volume at 15 million to 16 million units per month since mid-2018.

“Overall, this potentially implies a 28% quarter-on-quarter (QoQ) and 7% year-on-year (YoY) contraction in 1Q19 sensor production volumes,” Low stated.

Production volumes in 4Q18 averaged 52 million units per month, flat QoQ.

“This suggests that 4Q18 results due on Feb 25 should be relatively flat QoQ, against our previous estimates of sequential growth.

“On the whole, we revise down our 2019 sensor volume (estimates) by 11%, but leave those for 2020 (estimates) unchanged.”

Besides some lags in the company’s light-sensor division, Affin Hwang highlighted that Globetronics is steadily growing overall.

Low also noted that although its end customer’s products are seeing weaker demand, lower volumes in 1Q19 are looking seasonal, similar to last year’s drop.

“We were, however, surprised by the softer timing- device business although bottom-line impact should be small,” Low said, adding that the automotive laser headlight is shaping up and should help offset some of the slack in the timing device.

Regardless of the lower timing device volume, there would be no significant impact to Globetronics’ bottom line.

Affin Hwang reaffirmed its ‘Buy’ call on Globetronics and slashed 2018-2020 estimates earnings per share by 10%-16% and 12-month target price to RM2.55 from RM3.