Tuesday, 3 November 2015

Gtronic: In Boarding Phase

Globetronics FY15Q3 Financial Result

GTRONIC (RM mil) FY15Q3 FY15Q2 FY15Q1 FY14Q4 FY14Q3
Revenue 88.7 89.0 88.7 89.9 91.1
Gross Profit 26.7 26.6 25.8 17.8 27.1
Gross% 30.1 29.9 29.1 19.8 29.7
PBT 22.2 20.8 20.4 16.6 21.8
PBT% 25.0 23.4 23.0 18.5 23.9
PAT 20.5 17.9 17.1 15.3 17.7

Total Equity 311.5 301.0 280.4 284.6 298.3
Total Assets 403.2 372.8 342.4 358.0 362.9
Trade Receivables 69.6 69.6 68.4 73.7 65.9
Inventories 13.0 14.7 15.0 19.0 15.2
Cash 195.8 177.3 159.0 155.7 167.8

Total Liabilities 91.7 71.9 62.1 73.4 64.6
Trade Payables 17.7 21.7 17.2 33.5 16.3
Other Payables 48.4 30.7 25.9 33.7 31.4
ST Borrowings 20.4 15.2 14.8 1.7 8.1
LT Borrowings 0.0 0.0 0.0 0.0 0.0

Net Cash Flow 37.1 20.6 2.8 8.2 20.7
Operation 69.5 30.1 12.4 81.6 52.4
Investment -18.9 -6.4 -0.6 -21.4 -17.0
Financing -13.6 -5.1 -8.9 -52.0 14.7
PPE Purchase 24.4 8.9 2.1 28.1 18.3
PPE Depreciation 15.9 12.5 8.2 36.1 27.4
Dividend paid 36.6 22.5 22.5 61.8 30.9

EPS 7.28 6.38 6.10 5.45 6.31
NAS 1.11 1.07 1.00 1.01 1.06
D/E Ratio net cash net cash net cash net cash net cash

Gtronic posted a flat result for its FY15Q3, with marginally lower revenue and marginally higher PBT compared YoY to FY14Q3.

Gross profit margin retains at a healthy 30% level.

Net profit increased 12% QoQ and YoY due to lower tax as its sensor products contributes more to its revenue and they are said to be tax-exempted.

Contribution from sensor products is expected to increase tremendously next year. So its net profit margin might be even better.

Apart from this, cash flow and balance sheet remain healthy with a record net cash of RM175mil despite high dividend payout.

PPE depreciation charge has reduced quite significantly this quarter but it is expected to rise again after the 3D imaging sensor production kicks in.

This flat quarterly result is somehow expected as the new 3D imaging sensor production is yet to commence.

The production is reported to be slightly delayed to end of Nov15 with initial 2-3mil units per month. It is expected to run at 30-35mil units per month by Q2 of 2016.

Further delay might be disastrous as Apple is going to launch its latest iPhone in Q3 of 2016.

With the contribution from this imaging sensor, Gtronic's revenue and profit are expected to rise in tandem with its production.

So, I would expect its financial result to improve every quarter from FY15Q4 to FY16Q3.

However, how much improvement it can get will depend on the performance of other products/businesses such as proximity sensor, wearable sensor, LED etc which may face a slow down or lower selling price.

Now, flight GT7022 is like in a boarding phase. It will probably take off in FY15Q4 and enter climbing phase in the whole FY16, slowly climbing towards its cruising altitude and enter autopilot phase in FY17.

I'm talking about its earning, not its share price.

With so much cash on hands, we can't rule out that the management might acquire some good business to boost the company's profit in the future.

If this happens, Gtronic may continue to climb to a higher altitude.

I'm not asking anyone to buy Gtronic's shares as its actual PE ratio is quite high at the moment.

I don't have a target price for it, and I just hold it simply because its profit is expected to grow further.


  1. "I don't have a target price for it, and I just hold it simply because its profit is expected to grow further".
    Your statement above is actually practising what cold eye preaches, that is don't sell a stock when the earning of a business is expected to grow. He didn't mention at what PE one should sell a growing stock, he just simply said don't sell :)
    One of my weaknesses I spotted after reading his book is "i buy too early and sell too early". I hope I can learn and improve in this aspect.

    Btw, comparing Scientex and Globtronics, both are going to do better in 2016. Scientex has lower PE and I suppose it is a safer bet if one doesn't own any one of the two businesses, and planning to invest in one.
    Whenever there is a correction, I planned to invest into Globtronics. But, during that period, other stocks dropped more comparatively, so I picked other stocks instead :p. It's EPS will certainly jump in 2016, it is sad if one does nothing but just waiting for it's EPS to jump.

    1. You should have noticed that I rarely talk about target price when writing a Q result review since this year. I used to put target price in my portfolio page but now no more. As long as the company has great prospect, I will hold like doing business together with it.

      If I haven't got any shares in Gtronic, I'll also hesitate whether to invest in it now. But other stocks have even higher PE such as Prestariang, GDex, Myeg, IHH to name a few but they seem to be justified.