Wednesday 27 February 2013

Globetronics Technology Bhd - Ended On A Strong Note


Globetronics’ FY12  results  were  above  our  and  consensus  forecasts,  with  its  RM41.3m  net  earnings  accounting  for 107.2%/111.0%  of  our and street estimates. The group’s FY12 EBIT margin improved to 15.9% from 10.8% in FY11. The better performance was driven by strongersales in Malaysia and Singapore, as well as a disposal gain from its Jitra plant. We expect a 25% sales contribution from the group’s sensor manufacturing  segment  for  FY13,  which  is  set  to  be  its  fourth  growth  engine.  We  are  maintaining  our  BUY  call  on  Globetronics  with  arevised fair value of RM2.08, pegged to a higher projected FY13 EPS of 17.9sen, based on its 5-year average PER of 11.6x.  
 
Above expectations. The group’s FY12 results were above our and street estimates, with its full-year bottom-line accounting for 107.2% of our forecast  and  111.0%  of  consensus  estimate.  Its  revenue  climbed  9.4%  y-o-y  to  RM290.0m,  mainly  attributed  to  its  Malaysia  (+8.4%  y-o-y  to RM214.0m)  and  Singapore  (+119.4%  y-o-y  to  RM52.6m)  segments,  while  net  earnings  surged  54.9%  y-o-y  to  RM41.3m.  Meanwhile,  the group’s FY12 EBIT margin improved to 15.9% from FY11’s 10.8%. The better performance also included a RM2.3m net disposal gain of its Jitra plant. Stripping off the one-off gain, net earnings are still commendable at RM39.0m, up 46.3% y-o-y. 
 
Lower  q-o-q  on  seasonality,  one-off  gain.  The  4QFY12’s net profit of RM10.9m soared  by  more  than  one  fold  y-o-y  due  to  an  improved product  mix,  but  was  21.0%  lower  q-o-q  on  seasonality.  Generally,  its  4Q  was  weaker  than  3Q  as  most  orders  were  pushed  forward  to  3Q ahead of the festive seasons in 4Q. In addition, the one-off disposal gain in 3QFY12 widened the quarterly disparity. Excluding the one-off gain, 3Q net earnings would normalise to RM11.9m, representing a 5.8% q-o-q decline.

Final & special dividend of 3 sen. Globetronics is proposing a final single-tier dividend of 4% (2 sen) and a single-tier special dividend of 2% (1 sen)  to  reward  its  shareholders,  bringing  the  total  dividend  to  12  sen  for  FY12.  The  company  is  in  a  net  cash  position,  with  total  cash  of RM106.1m and no borrowing as of end-December 2012, which is equivalent to net cash per share of 39.3 sen.

Sensor  manufacturing  and  assembling  to  be  its  fourth  growth  engine.  The  company  started  its  sensor  manufacturing  segment  since  July 2012. The new division is contributing positively to the group’s sales, accounting for about 7% of its FY12 total sales. With Globetronics turning to a full turnkey contractor since November 2012, we expect the sensor manufacturing and assembling division to contribute about 25% of the group’s total sales in FY13. 
 
Maintained BUY, RM2.08 FV. In view of its better-than-expected FY12 results, we are revising our FY13 revenue and net earnings upwards by 28.8% and 9.5% respectively. We continue to like Globetronics for its: (i) prudent management, (ii) strong balance sheet, (iii) consistently high
dividend  payout,  and  (iv)  ability  to  capitalise  on  the  smartphone  and  tablet  wave.  We  are  maintaining  our  BUY  call,  with  a  higher FV  of RM2.08, pegged to a higher projected FY13 EPS of 17.9sen based on its 5-year average PER of 11.6x.

Source: OSK

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