Globetronics Technology Bhd

GLOBETRONICS Technology (Fundamental: 3/3, Valuation: 2.1/3) is a Penang-based semiconductor manufacturer. Reflecting the volatility of the semiconductor industry, with changing trends and technology, local companies such as Unisem and Malaysian Pacific Industries (MPI) have seen volatile earnings, including losses, in recent years. 

Globetronics, on the other hand, has had a stellar performance, with rising sales, profits and margins. A key differentiating factor is its focus on proximity sensor products, which started in 2012. Since then, profits have doubled in just two years. Apart from sensors, its other key product segments are Light-Emitting-Diodes (LED) and crystal timing devices. 

Proximity sensors are used to extend battery life in smartphones and tables, enabling Globetronics to ride on the boom in smartphones and tablets.  Extending this focus further, it is developing other forms of sensors, including three-dimensional (3D) sensors for smart devices and electronic systems in mid-2015. The market for this is projected to be worth US$3.4 billion in 2020. 

Globetronics has seen strong sales growth and double digit EBITDA margins. In 2014, net profit jumped 22.4% to RM64.4 million despite a smaller 10.5% increase in revenue to RM355 million.  EBIDTA margin rose from 27.5% in 2010 to 29% in 2014, while ROE improved from 12.7% to 23.0%. Going forward, growth will be driven by its sensor business, via volume and new products. 

At RM4.96, the stock is trading at trailing 12-month P/E of 21.65 times and 4.9 times book. Its P/E valuations can compress quickly if double digit growth momentum is maintained. The company had net cash of RM154 million or 55 sen per share as at end-2014, equivalent to 11% of its market price.

Its dividend increased substantially from 2 sen in 2010 to 16 sen per share in 2014, which translates to a 3.2% yield. 

This article first appeared in The Edge Financial Daily, on March 2, 2015.