Gtronic: Flat This Year Fatt Next Year?

Globetronics FY15Q2 Financial Result

GTRONIC	FY15Q2	FY15Q1	FY14Q4	FY14Q3	FY14Q2
Revenue	89.0	88.7	89.9	91.1	90.6
Gross Profit	26.6	25.8	17.8	27.1	27.1
Gross%	29.9	29.1	19.8	29.7	29.9
PBT	20.8	20.4	16.6	21.8	20.8
PBT%	23.4	23.0	18.5	23.9	23.0
PAT	17.9	17.1	15.3	17.7	17.3
Total Equity	301.0	280.4	284.6	298.3	291.4
Total Assets	372.8	342.4	358.0	362.9	361.2
Trade Receivables	69.6	68.4	73.7	65.9	70.3
Inventories	14.7	15.0	19.0	15.2	13.4
Cash	177.3	159.0	155.7	167.8	169.5
Total Liabilities	71.9	62.1	73.4	64.6	69.8
Trade Payables	21.7	17.2	33.5	16.3	17.2
Other Payables	30.7	25.9	33.7	31.4	32.1
ST Borrowings	15.2	14.8	1.7	8.1	11.5
LT Borrowings	0.0	0.0	0.0	0.0	0.0
Net Cash Flow	20.6	2.8	8.2	20.7	22.6
Operation	32.1	12.4	81.6	52.4	34.5
Investment	-6.4	-0.6	-21.4	-17.0	-10.9
Financing	-5.1	-8.9	-52.0	14.7	-1.0
PPE Purchase	8.9	2.1	28.1	18.3	11.1
PPE Depreciation	12.5	8.2	36.1	27.4	19.2
FCF			53.5
Dividend paid	22.5	22.5	61.8	30.9	19.6
EPS	6.38	6.10	5.45	6.31	6.17
NAS	1.07	1.00	1.01	1.06	1.04
D/E Ratio	net cash	net cash	net cash	net cash	net cash

Gtronic's FY15Q1 financial result is flat again QoQ and YoY, just like its previous quarterly result 3 months ago.

At 1H15, revenue and PAT improve 2.1% and 11.7% respectively.

Contribution from Singapore segment (probably sensor) continue to grow but contribution from Malaysia (?timing device) suffers slight drop.

Another flat quarter is expected for FY15Q3.

I mentioned before that Gtronic is the stock I like the most, though it's not my best stock performer.

If I were to use one word to describe Gtronic, it is "ROBUST".

Robust cashflow indeed, with anticipated robust growth.

Gtronic has pretty high PPE depreciation charge.

As we know, depreciation charge is a non-cash item.

How much are Gtronic depreciation charges throughout all these years?

GTRONIC (RM mil)	FY14	FY13	FY12	FY11	FY10	FY09
Revenue	355.0	321.4	290.0	265.0	279.2	217.5
Gross Profit	96.6	88.0	69.0	54.6	66.8	48.6
PBT	76.2	62.5	48.3	30.2	37.4	19.2
PAT	64.4	52.6	41.3	26.7	29.7	15.9
CFO	81.7	86.8	60.9	70.2	62.5	42.6
PPE Purchase	28.2	14.5	37.5	15.5	97.7	24.7
FCF	53.5	72.3	23.4	54.7	-35.2	17.9
PPE Depreciation	36.1	38.2	51.2	40.5	43.6	38.2

In FY14, Gtronic's PPE depreciation charge of RM36.1 was almost half (47.4%) of its PBT of RM76.2mil.

This means that Gtronic "actual pre-tax profit" is actually 47.4% more than what we see in the income statement.

For simple comparison, Inari's depreciation charge in FY14 was about 21% of its PBT.

From FY09 to FY12, the yearly depreciation charge of Gtronic was even more than its PBT!

This explains why Gtronic is able to give close to 100% dividend payout despite having high capex.

Since FY09, Gtronic produced impressive positive cashflow yearly except in FY10 when it spent a whopping RM97.7mil in the purchase of PPE.

If I'm correct, the capex in FY10 was mainly for its proximity sensor business which later contributed massively to its bottom line since FY12.

Now Gtronic is about to start Round 2 of such similar expansion.

Total capex of RM60-70mil is planned for its imaging sensor which is scheduled to start production in Q4 of FY15.

Initial capacity will be about 5mil unit/month and it will be increased gradually to 30 unit/mth in Q1 of FY16 and then 40mil unit/mth thereafter.

Current capacity for proximity sensor is at 23mil unit/mth and the selling price (and profit?) per unit for proximity sensor is expected to be lower than the new imaging sensor.

Something that puzzled me in this FY15Q2 is about the much lower PPE depreciation charge.

Gtronic average depreciation charge per quarter in FY14 was about RM9mil. 

The figure for FY15Q1 is RM8.2mil but only RM4.3mil in FY15Q2.

The depreciation charge has dropped significantly but the PBT does not seem to pick up. Does it mean that Gtronic is actually perform poorer in FY15Q2 compared to FY15Q1 & FY14Q2?

Anyway, depreciation charge is almost certain to increase later, along with its revenue, profit as well as dividend.

For its share price, I'm not so sure.