KUALA LUMPUR: Globetronics track record of execution likely means that earnings delivery will come.
Affin Hwang Capital believes the stock still offers attractive earnings growth and yields. After a series of investor meetings, the research house sensed that clients remain cautiously optimistic on Globetronics.
Although first quarter ending March 31, 2016 will likely be weak, Affin believes the share-price selling pressure has troughed and expect a meaningful rebound once Globetronics’ new sensors begin commercial production.
The company revealed that it has completed the line readiness audit for two sensor products, i.e., the imaging sensor and also a motion/gesture sensor. But management noted that they have yet to receive any volume confirmation.
Investors were concerns on the adoption of the imaging sensor across the end customer’s entire product mix.
The company also guided that its RM178mil cash pile would naturally come down as it undertakes material procurement for the new sensor which would require working capital.
“As the sensor business is expected to account for up to 56% of 2016 revenue, management guided that they have been continuously working to reduce risk exposure to the single end customer. In the works, is a collaboration for the introduction of several new sensor products to the Korean and Chinese smartphone manufacturers. Optimistically, this could take off as soon as the end of 2016,” said Affin.
It reaffirms its Buy rating and 12-month target price of RM6.28.
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