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Monday, September 18, 2017

Globetronics plans to ramp up capacity

Monday, 18 Sep 2017
by david tan

Group chief executive officer Datuk Heng Huck Lee, the company will raise its total investment for this year to RM103mil from RM85mil planned in the first quarter to meet the rising orders for its sensor products.

GEORGE TOWN: Globetronics Technology Bhd

image: plans to invest more money to raise its capacity despite a downgrade call on the stock by some analysts after its core products did not feature in the new range of smart phones.

According to group chief executive officer Datuk Heng Huck Lee, the company will raise its total investment for this year to RM103mil from RM85mil planned in the first quarter to meet the rising orders for its sensor products.

“Our order book is filled till the second quarter of next year, prompting the group to raise its investment for this year.

“Globetronics is on track to achieving a strong double-digit percentage growth for its revenue and bottom line in 2017 over 2016,” Heng told StarBiz.

The bulk of the investment or more than 85% will be used for the development and production of three new sensors.

“As a result, we have seven sensors in mass production now, of which four are used in mature smart phones and wearables that are still popular in emerging markets.

“The other three new sensors are being used in new smart phones and wearables that have just been launched,” Heng said.

He refuted suggestions that Globetronics sensor products were not featured in the new range of smart telecommunication products.

“We were asked to invest to increase the production capacity of our sensors for wireless earphones.

“We strongly believe that the wireless earphones will be used for an upcoming mobile telecommunication product scheduled to be launched in early 2018,” Heng said.

Besides the strong contribution from the sensor segment, the group’s growth for 2017 would also be driven by timing devices for consumer electronic products and LED sensors for the automotive and special lighting industries.

Globetronics is also optimistic of growth next year as three of its new sensors and the blue laser LED headlamp for the automotive industry are in various prototyping stages and engineering qualifications.

To support the new production in 2018, the group might be required to invest RM40mil to RM50mil until mid-2018.

The prototypes of the three new sensors are being qualified by the company’s US customer for the next generation of smart mobile phones and wearable devices, according to Heng.

“Our blue-laser LED headlamps to be used in high-end cars will go into production in the first quarter of 2018.

“In addition, our depth sensor, which complements three dimensional imaging, had been qualified by a very large US customer and is expected to go into mass production soon.

“The projected volume for the depth sensor is not confirmed, but the product will help to boost our performance.

“Should the need arise, we will increase the investment in the second half of 2018,” he pointed out.

Maybank IB research house has slashed its profit estimates for Globetronics by 9%-13% for financial years 2017, 2018 and 2019, as the newly launched Apple smartphone did not feature the bundling of wireless earphones.

Maybank IB has downgraded its call on Globetronics to a “sell” and lowered its target price to RM5.80 from RM6.40.

“We had previously cautioned that consensus has been too optimistic in the estimates for the demand of gesture sensors, which may have assumed the bundling of wireless earphones for up to all three variants of the new smartphone.

“We believe this reality will likely translate to downgrades in forward earnings for Globetronics,” Maybank IB said in a report.

However, a UOB Kay Hian report has maintained a positive stand on Globetronics’ earnings prospects, maintaining a “buy” call with a higher target price of RM7.50.

According to the UOB Kay Hian report, there could be earnings upside to its 2018-2019 forecast, driven by the commercialisation of the three-dimensional imaging sensors, and the huge demand for gesture sensors.

According to a GfK research, more smartphones were sold globally during the three months to end-June 2017 compared with any other second quarter on record.

The research says global smartphone demand totalled 347 million units during the three months, up 4% from the same period a year earlier, particularly helped by the robust appetite for new products in emerging parts of Asia as well as central and eastern Europe.

GfK researchers said that overall the value of the market grew by 9% year-on-year, due to the rising average sales price of individual smartphones.

According to the International Data Corp worldwide quarterly mobile phone tracker, smartphone OEMs shipped a total of 341.6 million smartphones worldwide in the second quarter of 2017 (2Q17).

“Coming off a higher-than-expected first quarter, smartphone shipments declined 1.3% from the same quarter a year ago and were down 0.8% from 1Q17.

“While the smartphone industry contracted slightly in the second quarter, it is worth noting that the leading vendors saw positive shipment growth.

“Samsung and Apple both held shares relatively constant from the second quarter a year ago, while the other three vendors rounding out the top five – Huawei, Oppo, and Xiaomi – all grew shares,” the report said.


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