KUALA LUMPUR (May 8): Maybank Investment Bank (Maybank IB) has maintained its “sell” rating on Globetronics Technology Bhd at RM1.01 with an unchanged target price of 87 sen and said Globetronics’ prospects remain challenging in the financial year 2023 (FY2023).

In a note on Monday (May 8), the research house said industry demand for consumer electronic wearables remained soft across the board with a near-term recovery unlikely.

It said Globetronics’ plant utilisation rate was circa 65%-66% in the first quarter of 2023 (1Q2023), down from circa 72%-73% in 4Q2022 and over 80% in the first half of 2022 (1H2022).

“Sensor biz monthly production run-rates only averaged 20 million/17 million/4.5 million units for light/gesture/motion sensors throughout 1Q2023.

“We estimate the q-o-q decline in 1Q2023 to be in the region of 15%/10%/10% respectively, and growth is likely to remain flat in the current quarter owing to tepid 2Q2023 customer forecasts, coupled with the eight-day festive break in late April,” it said.

Maybank IB said customer concentration risk for the sensor business also remains a concern for Globetronics, with its Austrian customer being the sole revenue contributor at present.

“Of the customer’s 55% contribution to group turnover in 1Q2023 (62% in FY2022), circa 90% is directly dependent on demand from its US end-customer, a leading global MNC in consumer electronics.

“Although GTB (Globetronics) is currently working with both customers to develop next-gen motion sensors for the latter’s (the US end-customer) smartwatch line, we are not hopeful of a significant ramp-up in volumes upon mass production in FY2024,” it said.

Maybank IB said Globetronics will see significant increases in overhead costs in FY2023.

“Due to ICPT tariff hikes, utility costs rose by RM350,000 in January-February, but the increase only averaged RM280,000 per month from March owing to the successful bidding of green electricity tariff blocks.

“Labour costs are also expected to rise by RM1.2 million this year but mgmt (management) aims to mitigate its impact via aggressive headcount mgmt,” it said.