Wednesday, 24 July 2013

Gtronic: Eyes On FY13Q2

In every hand held mobile device (smartphone/tablet) that you use, there is probably one or two electronic components inside it which is manufactured by Globetronics. This is what the CEO said.

Since founded in year 1991, Globetronics has been making profit every year, though its profit fluctuates according to global economy trend.

The exciting part is, throughout the years, Globetronic has successfully diversified its business from integrated circuits service/products to include timing & quartz crystal devices, LED, proximity sensor and others.

Globetronics proximity sensor which is its latest addition, started production in Q2 2012 with 4 mil units per month in April 2012. Currently the production has increased significantly to 20 mil units per month in May 2013. The proximity sensor contributes 7% of total revenue in 2012 but in Q1 2013, it has reached 21% of total revenue for that quarter. It is estimated that this percentage will stay the same for the whole FY2013.

The proximity sensor has received 10 years tax-exempt status (starting July 2012). It is also given "Direct Domestic Investment" grant by MIDA/MITI. The grant is estimated to contribute RM5-6 million per year to its bottomline over FY13-15. Besides the current Swiss customer, the proximity sensor is awaiting qualification by a US based customer.

Besides the proximity sensor, the production of its temperature compensation frequency device has increased from 4 mil units per month in Jan 2013 to 8 mil per month in May 2013, as it is now being built into a popular Korea based smartphone.

While its integrated circuit business remain flat, Globetronics's timing device & LED are believed to enjoy increasing demand from its old and new customers. The timing device is still the group's major revenue contributor with almost 33% of FY12 total revenue. It is producing about 120 million units of timing device per month.

According to Affin research, new product optical lense which can be used in camera flash component in smartphone, will be rolled out by Q3 2013. HwangDBS Vickers reported that Globetronics latest product in 2013 is optical interface sensors which is currently in negotiation with a Japanese customer.

Globetronics gives attractive dividend. It has a dividend payout policy of minimum 50% of net profit. It paid 64% and 54% for 2011 and 2012 respectively. It cleared all its debt in early 2012 and is currently debt free with RM109 million of cash at the end of Q1 2013 (ended 31st March 2013).

Apart from the organic growth, Globetronics does not rule out acquisition of oversea companies that complement its business in the future. Its management has hinted that it has been studying a few acquisition targets and hope to finalize one acquisition within the next 1 year.

Globetronics looks like a good company which is worth to invest in for mid term. It has great balance sheet, strong management team, good growth prospect especially with the popularity of hand held mobile devices, and it pays good dividend too. The question is at the share price of RM2.40-2.45, how far the share price go from here?


Globetronics will release its Q2 2013 result soon, will the target price be revised upwards or downwards? I believe that it will post a strong result. 

Globetronics and Inari, which is better?

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