KUALA LUMPUR (Aug 26): Shares of Globetronics Technology Bhd (KL:GTRONIC) fell on Monday to their lowest in 15 months after the semiconductor assembly and test company’s latest results failed to meet analysts’ expectations. 

Globetronics declined as much as seven sen or 6.3% to RM1.05, its lowest since May 2023. 

The stock was trading RM1.06 at 9.50am, giving the company a market capitalisation of RM716 million. Trading volume totalled 1.63 million shares so far. 

Globetronics reported a net profit of RM4.3 million for the second quarter ended June 30, 2024 (2QFY2024), on revenue of RM27.76 million, bringing its first half of 2024’s (1HFY2024) net profit to RM10 million, which accounted for 26% of UOB Kay Hian Research’s forecast and 29% of consensus full-year estimates, it noted.  

At least three research houses have since cut their target prices and slashed earnings projections for the group, citing anticipated weaker loadings from Globetronics’ key customers.

“We reduce our 2024 and 2025 earnings forecasts by 25% and 23%, respectively, due to slower loadings from key customers,” UOB Kay Hian said in a report on Monday.

Still, the research house foresees Globetronics remaining relevant as a proxy to 5G, Internet of Things (IoT), and Vertical-Cavity Surface-Emitting Laser (VCSEL) deployments, leveraging its outsourced semiconductor assembly and test (OSAT) capabilities. 

Globetronics is also developing new sensors for commercialisation in 2H2024 and is actively engaging with potential Chinese and Taiwanese customers for future growth, it noted. 

UOB Kay Hian has revised its target price for Globetronics to RM1.20, from RM1.30 previously, based on 23 times Globetronics’ 2025F (forecast) price-earnings ratio, while maintaining its “hold” rating on the stock. 

Maybank Investment Bank, likewise, anticipates Globetronics’ earnings to continue to underperform in 2HFY2024, noting that its management has guided for flat or lower volume loadings year-on-year. 

The investment bank cut its earnings estimates for Globetronics by 36% for FY2024, 20% for FY2025, and 19% for FY2026, citing stiff competition in the premium wearables market and uncertainty over new customer onboarding.

It also cut its target price for Globetronics to RM1.17 (previously RM1.65) to account for the group’s prolonged weak medium-term outlook, while maintaining its “hold” rating on the counter. 

Globetronics currently has six “hold” recommendations and two “sell” calls, with a consensus 12-month target price of RM1.24, representing a potential 10% upside from its last traded price, according to Bloomberg data. 

“We understand [that] the group is actively engaging potential customers to secure new business, but we expect any traction to be seen only towards the end of the year,” MIDF Research wrote in a report on Monday.

It added that given the weak performance, future dividends are expected to be lower compared to FY2023, translating to a dividend yield of less than 2%. 

MIDF Research revised its target price for Globetronics downward to RM1.09 from RM1.10, as it reduced Globetronics’ FY2024 to FY2026 earnings estimates lower by -8.4% to -10.5%.

The counter closed the morning session at RM1.05 on Monday, down 6.25% from its closing price of RM1.12 last Friday (Aug 23).