Globetronics’ 3Q earnings below expectations

The company’s revenue and earnings are lower due to lower volume loading for its gesture sensor products and the winding-down of its QCTD segment

by S BIRRUNTHA / Pic credit: globetronics.com.my

MAYBANK Investment Bank Bhd (Maybank IB) has lowered Globetronics Technology Bhd’s forecast earnings for the financial year ending Dec 31, 2021 (FY21), FY22 and FY23 by 16%, 15% and 12%, respectively.

This follows Globetronics’ earnings for the third quarter ended Sept 30, 2021 (3Q21), came in lower than expected on lower volume loading for its gesture sensor products and the gradual winding-down of its quartz crystal and timing device (QCTD) segment.

The investment bank cut its target price (TP) for Globetronics to RM2.44 from RM2.80 previously after revising its earnings forecast.

Despite the revised TP and earnings forecast, Maybank IB maintained a ‘Buy’ call on Globetronics for its favourable LT industry prospects and solid net cash balance of 28 sen per share.

“Management has decided to restructure its QCTD segment (18% of FY20’s revenue) with its operational lines in Kuala Lumpur for a key Japan-based customer slated to end production in November.

“What remains of the segment’s Kuala Lumpur operations will then be moved to its Penang facility, where overheads are lower and thus allowing for greater operational leverage.

“Post-consolidation, we project lower QCTD production volumes at just 7.5 million pieces per month versus 30 million pieces previously,” Maybank IB said in a note yesterday.

Globetronics’s net profit for the 3Q21 slipped 9.8% year-on-year (YoY) to RM16.27 million while quarterly revenue fell 15% YoY to RM55.66 million.

However, on a quarterly basis, Globetronics’ net profit surged 160% while revenue was up 20%.

Maybank IB noted that the steep sequential or quarter-on-quarter rise in earnings was expected as the second half tends to be a stronger half.

Globetronics’ YoY revenue and earnings were dragged due to lower volume loading for its gesture sensor product line and the gradual cessation of its QCTD business for a key customer.

Maybank IB remains upbeat on Globetronics’ prospects in the long run supported by its sensor segment and its LED business, and despite the predicament of its gesture sensor customer facing stiff competition from Chinese manufacturers.

Maybank IB believes Globetronics’ sensor segment would benefit from the upcoming holiday season splurge on newly launched mobile devices.

The company would also see a pick-up in the LED segment as electrical vehicles (EVs) penetration in developed countries continues to gather pace.