Globetronics Overreliance On Single Key Customer A Concern: MIBB

Photo from DustyDingo

Industry demand for consumer electronic wearables remains soft across the board with a near-term recovery unlikely. Globetronics Technology (GTB)’s plant utilisation rate was 65-66% in quarter one 2023, down from 72-73% in quarter four 2022/first half 2022 respectively. 

Sensor biz monthly production run-rates only averaged 20 million/17 million/4.5 million units for light/gesture/motion sensors throughout quarter one 2023. 

Maybank Investment Bank Bhd (MIBB) in a recent report said growth is likely to remain flat in the current quarter owing to tepid quarter two 2023 customer forecasts, coupled with the 8-day festive break in late-April. 

Customer concentration risk for the sensor biz also remains a concern, with its Austrian customer being the sole revenue contributor at present. Of the customer’s 55% contribution to group turnover in quarter one 2023, 90% is directly dependent on demand from its US end-customer, a leading global multinational corporation in consumer electronics. 

“Although GTB is currently working with both customers to develop next-gen motion sensors for the latter’s smartwatch line, we are not hopeful of a significant ramp-up in volumes upon mass production in financial year 2024,” said MIBB.

Elsewhere, MIBB gathered that management is also in talks with prospective customers from China and Taiwan for GTB to act as an alternative production site for an array of new product platforms.

The group will see significant increases in overhead costs in financial year 2023. Due to ICPT tariff hikes, utility costs rose by RM350,000 in Jan-Feb but the increase only averaged RM280,000 per month from March owing to the successful bidding of green electricity tariff blocks. 

Labour costs are also expected to rise by RM1.2 million this year but the management aims to mitigate its impact via aggressive headcount management. 

With 70% of the group’s revenue and 40% cost of goods sold denominated in USD, and the fact that the management only hedges less than 5% of its exposure, forex volatility could add further bottom-line pressure in financial year 2023.

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