Globetronics Subdued Earning With Eye On Better Earnings Recovery In 2H2024

Globetronics Technology Berhad (Globetronics) has been subdued by itearnings performance.

MIDF Research on Friday (May 10) said they upgraded recommendation for Globetronics to NEUTRAL (previously SELL) with an unchanged target price of RM 1.10.

This follows the announcement on 1QFY24 financial performance which is in-line with expectations. 

Note that the share price has declined by -24.4% on a year-to-date basis,  in tandem with MIDF’s previous SELL recommendation. At the current price  level, coupled with MIDF’s expectation of a better 2HFY24 performance, they foresee limited downside risk. 

Supported by higher interest income. Globetronics 1QFY24 normalised earnings came in at RM3.9m. This translates  into an improvement of +17.1%yoy. This was mainly attributable to  higher interest income which surged by +42.0%yoy to RM0.4m as well  as lower cost of sales which reduced by -18.1%yoy to RM17.8m.

Meanwhile, 1QFY24 revenue remains weak at RM29.9m, a decline of – 9.7%yoy in view of lower volume loadings from the group’s certain  customers.

In this respect, the utilisation rate remains below the 70%  mark at around 67% to 68%. Note that the sensor segment remains the  largest revenue contributor at 61%, followed by SLL/LED components  (22%) and ICs (17%).

In-line with MIDF’s expectation. All in, MIDF’s view is that Globetronics’s 1QFY24 financial performance is in line with expectation, though it only makes  up 13.8% of their full year FY23 earnings estimates. Historically, the first  quarter results are usually weaker. Moreover, MIDF expects better performance in 2HFY24. 

No strong signs of recovery yet. In the near term, management  hinted that the volume loadings for the group’s main business segment, i.e. sensor business, remain weak. However, this should pick up in  2HFY24 in view of new customer/products development as the group is  set to benefit from “China +1” and “Taiwan + 1” strategy.

Earnings estimates and target price intact. As 1QFY24 earnings performance kept pace with expectations, MIDF made no changes to earnings estimates at this juncture. MIDF’s target price is also intact at RM1.10.

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