Globetronics sees a stronger 2021

Globetronics revenue

GEORGE TOWN: Smart sensor producer Globetronics Technology Bhd plans to allocate RM45mil to expand its operations next year as it forecasts a stronger 2021, barring unforeseen changes.

Group chief executive officer Datuk Heng Huck Lee (pic below) told StarBiz that the group had received strong forecast and orders for most of the group’s products.

“We have four new projects for 2021 and beyond. All these new projects will boost our growth and bottomline starting from the first half of 2021, ” Heng said.

According to Heng, the group will spend about RM11mil to expand an additional of 25,000 sq ft of factory space, equipped with a cleanroom facility.

“Construction is expected to start before year end.

“This new cleanroom has a critical role to play, which is to support our production of advanced smart sensors.

“We are budgeting RM34mil to upgrade design and development capabilities and a new production capacity to support the recently secured projects, ” he added.

According to Heng, the group has set aside more than RM10mil to start its Industry 4.0 (IR4.0) modernisation programme.

“Over the next 24-36 months, we will spend around RM30mil to achieve light-off operation that will enable robots and automated guided vehicles to manage the production of our smart sensors, ” he said.

Globetronics posted a net profit of RM33.9mil in after-tax profit for the nine months ended Sept 30,2020, compared to RM30mil registered in the same period a year ago.

“Judging from the order and loading forcast for the remaining eight weeks to year-end, we are confident to outperform our 2019 financial achievement, ” he said.

Heng said the electronic and semiconductor industry is recovering steadily from the pandemic.

“The prospects of a worsening US-China trade conflict has compelled most customers to increase their orders.

“Malaysian technology companies will continue to benefit with additional re-allocation of products loading to Malaysia.

“We are also optimistic to add new revenue and profit contributors from new customers we are not currently serving in 2021.

“Our smart sensor order book is filled, and the production line is operating at near maximum capacity till year-end.”

Heng said the group’s net cash of RM149.7mil as of June 30 would be able to cover the group’s operational expenses and working capital for at least 24 months.

“The credit term for our trade receivables is less than three months, ” he added.

The group’s current ratio is 5.9 times, based on existing assets of RM197.7mil and current liability of RM33.5mil.

The worldwide smartphone market is expected to drop 9.5% year-on-year in 2020 with shipments totalling 1.2 billion units, according to the International Data Corp (IDC).

“The IDC expects that the smartphone market will return to a full recovery by 2022 and will achieve a compound annual growth rate (CAGR) of 1.7% over the five-year forecast, largely driven by the assumption that smartphones will continue to be the computing platform of choice for most of the world, ” Heng said.

“5G remains a priority for all smartphone and smart device manufacturers despite the challenges with the Covid-19 pandemic and lack of consumer demand.

“Many top vendors have cut 4G production plans this year to align with the market decline. Their plans to carry on with production for 5G units remain unaffected, ” he added.

According to IDC, this supply-driven 5G push mixed with a poor economic climate will only accelerate the drop in 5G average selling prices (ASPs) in 2020 and beyond.

In the past quarter, China saw 43% of 5G devices priced under US$400.

IDC expects global 5G smartphone ASPs to hit US$495 by 2023, which should eliminate most of the price concerns voiced by consumers in recent IDC surveys.

As a result, IDC expects 5G smartphones to capture 50% of the global market by 2023.

Reflecting the optimism for Globetronics, UOB Kay Hian in a recent report said the commercialisation of the company’s new products should set the stage for a stronger 2021, noting that the latter’s new generation of sensors would be qualified starting from end of 2020.

“Additionally, further impetus could come from the introduction of a new sensor, for which the group is working with a same major customer with commercialisation to take place in the next two quarters.

“We have yet to factor this in our earnings estimates, ” said the research house.

Similarly, AmInvestment Bank said Globetronics’ strength in smart sensors and a ramp-up in laser automotive headlamps production to boost its LED segment, together with the company’s exposure to the US-China trade war opportunities will put it on a strong footing in the year ahead.

Although generally positive on the company, AmInvestment feels that all its positive prospects have been fairly valued.

“Key risks for the stock include a decline in end demand for consumer electronics affecting the sensor division outlook, and prolonged supply chain disruptions due to the worsening Covid-19 impact, ” the research house said.

Globetronics shares closed five sen higher to close at RM2.97 last Friday.

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