GTRONIC: Sensing Growth In FY15?

Globetronics FY14Q4 Financial Result

GTRONIC	FY14Q4	FY14Q3	FY14Q2	FY14Q1	FY13Q4
Revenue	89.9	91.1	90.6	83.4	78.5
Gross Profit	17.8	27.1	27.1	25.0	20.0
Gross%	19.8	29.7	29.9	30.0	25.5
PBT	16.6	21.8	20.8	17.0	15.0
PBT%	18.5	23.9	23.0	20.4	19.1
PAT	15.3	17.7	17.3	14.1	13.1
Total Equity	284.6	298.3	291.4	272.4	275.2
Total Assets	358.0	362.9	361.2	325.9	338.8
Trade Receivables	73.7	65.9	70.3	60.6	62.4
Inventories	19.0	15.2	13.4	11.1	14.2
Cash	155.7	167.8	169.5	141.0	147.3
Total Liabilities	73.4	64.6	69.8	53.5	63.6
Trade Payables	33.5	16.3	17.2	9.9	18.4
Other Payables	33.7	31.4	32.1	29.8	34.3
ST Borrowings	1.7	8.1	11.5	9.9	5.2
LT Borrowings	0.0	0.0	0.0	0.0	0.0
Net Cash Flow	8.2	20.7	22.6	-6.3	41.5
Operation	81.6	52.4	34.5	13.2	87.5
Investment	-21.4	-17.0	-10.9	-7.1	-11.2
Financing	-52.0	14.7	-1.0	-12.3	-34.7
Dividend paid	61.8	30.9	19.6	19.6	47.1
EPS	5.45	6.31	6.17	5.04	4.73
NAS	1.01	1.06	1.04	0.97	0.99
D/E Ratio	net cash	net cash	net cash	net cash	net cash

Though Gtronic's latest revenue and net profit are better YoY, they are poorer if compared QoQ.

Its latest gross margin is uncharacteristically low at 19.8% in this quarter compared to 25-30% in previous quarters.

The reasons of the lower net profit in current quarter is due to inventories adjustments in the supply chain and shutdown of manufacturing hubs/customers' facilities in Dec14.

I think the inventories adjustment should be a temporary issue but not too sure whether shutdown of customers' facilities means losing orders for long term or short term.

Anyway, slower Q4 is not that bad as it provides more room for growth in subsequent FY.

Bank borrowing has been reduced to just RM1.7mil but it may rise in FY15 due to high capex for business expansion. Cash is still aplenty at RM155.7mil.

GTRONIC (RM mil)	FY14	FY13	FY12	FY11	FY10	FY09
Revenue	355.0	321.4	290.0	265.0	279.2	217.5
Revenue growth %	10.5	10.8	9.4	-5.0	28.3	-21.0
Gross Profit	96.6	88.0	69.0	54.6	66.8	48.6
Gross%	27.2	27.4	23.8	20.6	23.9	22.3
PBT	76.2	62.5	48.3	30.2	37.4	19.2
PBT%	21.5	19.4	16.7	11.4	13.4	8.8
PAT	64.4	52.6	41.3	26.7	29.7	15.9
PAT growth %	22.4	27.4	54.7	-10.1	86.8	-27.1
EPS	22.94	19.02	15.31	9.99	11.20	6.07
NTA	1.01	0.99	0.96	0.92	0.92	0.86
ROE	22.6	19.1	15.8	10.8	12.4	7.0

Overall, FY14 is a record year for Gtronic in term of total revenue and net profit. 

Its FY14 revenue and net profit of RM355.0mil and RM64.4mil are 10.5% and 22.4% higher respectively compared to FY13.   

Looking back into its history, Gtronic's previous revenue record is set 10 years ago in 2004 at RM347.9mil. However, its net profit in 2004 was just half of current level.

With latest net profit of RM64.4mil which is lower than my guesstimated figure of RM70mil, EPS stands at 22.94sen.

If fair PE is 18x, then target price will be RM4.13. Its share price closed as RM4.99 today.

This target price is not so meaningful for me as Gtronic's share price almost always traded above my own target price.

There are many stocks traded at PE of higher than 20x out there, why not Gtronic who has good growth potential?

I'll keep my previous target price of RM4.48.

From The Star report in Nov14, Gtronic's management mentioned that sensors business will lead the company's growth in 2015.

It is expected to start commercial production for its new product 3D sensors in mid-2015. This latest technology is projected to have a CAGR of 23.4% from 2014 (USD789mil) to 2020 (USD3.4bil) globally.

Besides, it also targets commercial production of bio-sensors used in portable health devices in the second half of 2015.

Gtronic has earlier started the production of motion & optic sensors for wearable devices since July14. It plans to ramp up its production in Q1 of 2015.

Its proximity sensor's monthly production has increased about 30% from 15-16 million units in 2014 to 20 million units at the moment.

Other than its sensor business, other business segment such as timing devices and LED are also expected to register growth.

Total capex planned for FY15 is as much as RM50mil.

Div (sen)	FY15	FY14	FY13	FY12	FY11
1st	2(6)	2(5)	5	2	1.5
2nd		5(6)	5(4)	5(2)	5
3rd			2(2)	2(1)	2
Total	8+	18+	18	12	8.5

Special div in bracket 

Gtronic has just declared 2sen + 6sen special first interim dividend for its FY15. This is 1sen higher than the corresponding period in FY14.

It will declare the final dividend of FY14 usually in April.

In FY13, Gtronic paid a total of 18sen dividend which represents about 95% of its FY13 net profit.

If it were to pay the same 95% for its FY14, then it will be approximately 21.5sen. So far it has already paid 18sen dividend for FY14 and I guess it will pay another 4sen to make it total 22sen for FY14.

The dividend yield will be 4.4% at share price of RM5.00.

Even though its PE is already quite high, I will keep my Gtronic shares as I don't hold a lot. Its growth might not be over yet and it pays good dividends too.

Anyway, I'm still waiting for a strategic acquisition by Gtronic

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