PETALING JAYA: Globetronics Technology Bhd share price was hit following a weak set of earnings announced by the company, which was below consensus estimates.
Several analysts have a “buy” call on the counter as they expected slower earnings growth.
Globetronics was among the top decliners on Bursa Malaysia yesterday along with a number of semiconductor companies, as investors were feeling the impact of the US-China trade war.
Overall, Bursa Malaysia’s technology index, which includes semiconductor manufacturers, fell more than 4.5% yesterday.
It is worth noting that the index has risen more than 32% on a year-to-date basis.
UOB Kay Hian Malaysia Research said for the first nine months ended Sept 30,2019, Globetronics saw its revenue dropped 36% year-on-year due to a decrease in volume as some investors are cautious on the outlook of the electrical and electronic industry because of the US-China trade dispute.
“This was caused by a tighter shipment control imposed by certain customers on a cautious outlook due to the US-China trade dispute alongside lower demand related to the smartphone market, ” it said in a report yesterday.
Shares in Globetronics closed 4.55% to RM2.10 yesterday.
For the third quarter ended Sept 30, Globetronics posted a 19.7% decline in net profit to RM18.94mil from RM23.6mil for the same quarter last year, due to “lower volume loading of products from certain customers for the group”.
Earnings per share (EPS) fell to 2.83 sen from 3.54 sen previously.
Its revenue for the quarter was down 24.45% to RM66.26mil compared with RM87.7mil last year.
Cumulatively, for the first nine-month of FY19, Globetronics’ net profit slipped 37.3% to RM30.18mil from RM48.13mil last year, while revenue fell 35.96% to RM157.36mil from RM245.72mil previously.
Affin Hwang Capital said the first nine-month earnings was below expectations and consensus.
“We cut 2019-20 EPS by 3% to 11% to reflect the earnings disappointment. However, we maintain our ‘hold’ rating after raising our target PE multiple to 20 times from 16 times to reflect the improved sentiment on the sector, ” Low said.
Affin Hwang lifted its Globetronics share target price to RM2.10 from RM1.74 despite the earnings cut.
While Globetronics expected a strong recovery in its overall business and volume loading in the second half of the year, MIDF Research reckoned that it wouldn’t be sufficient to make up the performance in the first half of the year.
“The soft volume loading continue to negatively impact the group’s well-being as seen in the first half of 2019 financial performance.
“While we expect some earnings recovery in the second half, we opine that it would be insufficient to make up for the underperformance seen in the first half, ” it said in a note to clients.
MIDF has a “sell” recommendation on Globetronics due to the poor near-term outlook.
“We expect the share price to come under great pressure, ” it said.
“While we acknowledge the group’s effort to diversify away from the smartphone market, we are of the view that meaningful contribution to the bottomline can only be seen in the later part of 2020, ” it added.
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