This article first appeared in The Edge Malaysia Weekly on December 18, 2023 - December 24, 2023
THE Ng family intends to exit Globetronics Technology Bhd, a Penang-based outsourced assembly and test firm that it founded, according to sources. “Talk of the Ng family’s exit from Globetronics has been circulating in the past few months as they’re looking to cash out from the business,” says a source.
The Ng family collectively owns about 8% of Globetronics, mainly held through its key entity General Produce Agency Sdn Bhd.
The reason behind the divestment by the founding family is not known.
APB Resources Bhd — which is involved in the fabrication of specialised design process equipment for the petrochemical, oleochemical, oil and gas, power as well as food and beverage industries — is likely to be the buyer of the equity stake, says the source.
A share sale agreement is set to be signed before the year end. The block of shares is expected to fetch as much as RM2 per share.
The share price of Globetronics has gained 55.2% year to date. It has been on the rise since May. The counter closed at a two-year high of RM1.80 last Friday, giving the company a market capitalisation of RM1.21 billion.
Based on the RM1.80 closing price, the block of roughly 53.78 million shares is valued at RM96.8 million.
The share price rally happened despite analysts’ less bullish views on the company, with a consensus target price of RM1.35, implying a downside potential of 25%.
The Employees Provident Fund is the largest shareholder of Globetronics with a 14.1% stake. It is worth noting that Globetronics is one of the companies on Bursa Malaysia that the provident fund has the highest shareholding in.
Other substantial shareholders of Globetronics are Ooi Keng Thye (7.19%) and Lembaga Tabung Haji (5.38%).
Listed on the local bourse in 1997, Globetronics was co-founded by former executive chairman Michael Ng Kweng Chong, whose son Ng Kok Yu is the current executive chairman. Other Ng family members who sit on the board are chief financial officer Ng Kok Choon and non-independent non-executive director Ng Kok Khuan.
In the nine months ended Sept 30 (9MFY2023), Globetronics’ net earnings fell 40.4% to RM19.91 million from RM33.4 million in the previous corresponding period, owing to lower volume loadings from certain customers and lower foreign exchange gains.
“The year 2023 would be a challenging one for the group, and the group is expected to experience a decline in profitability for the financial year. Several factors contributing to this decline include softer revenue forecasts from our customers, the full-year tax impact of our expired pioneer status in one of the subsidiaries, the full impact of the increased minimum wage and increase in utility costs,” Globetronics said in a note accompanying its third-quarter results.
After achieving a net profit of RM70.12 million in the financial year ended Dec 31, 2018 (FY2018), the company’s earnings contracted to RM45.46 million in FY2022.
With the rising share price and lacklustre financial performance, the stock is trading at a much higher 12-month forward price-earnings ratio of 46.8 times compared with peers such as Inari Amertron Bhd (28 times) and Malaysian Pacific Industries Bhd (38 times).
Reiterating a “sell” call, MIDF Research has cut its target price for Globetronics to 89 sen following the group’s dismal financial performance. “Despite anticipating better revenue performance in 2HFY2023, full-year FY2023 earnings would still be significantly lower compared with FY2022,” the research house said in an Oct 25 note, pointing to lower utilisation rate as a result of low product demand.
While the sensor division is expected to remain the key top-line contributor in FY2023 and FY2024 on the back of new smartphone models, Globetronics is in the midst of diversifying its portfolio into non-consumer products in the industrial and automotive sectors.
AmInvestment Bank Research is neutral on the revenue contributions of both segments in FY2024 given the longer time required for product qualification.
Over at APB, the company has a cash-rich balance sheet. Its cash balance amounted to RM59.7 million against long-term borrowings of RM2.32 million and short-term debt of RM234,000.
Press Metal Aluminium Holdings Bhd co-founder Datuk Koon Poh Tat emerged as the single largest shareholder of APB in June. APB’s share price has more than doubled since late April. It closed at RM2.69 last Friday, giving the company a market value of RM303.6 million.
In October, APB CEO and executive director Yap Swee Sang ceased to be a substantial shareholder after disposing of five million shares, or a 4.51% stake, via Ikram Pintas Sdn Bhd for RM11 million, or RM2.20 per share. He is now left with less than 1% equity interest in APB.
APB recently announced plans to acquire the 16-storey Menara Serba Dinamik in Shah Alam, Selangor, for RM38 million.
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