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Introduction of two additional sensor products (i.e. 3Dimaging & healthcare) to drive growth in FY16.
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Earnings visibility is strong. Raise FY16/17 earnings by 3%/5%, incorporating contribution from healthcare sensors.
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Maintain BUY with higher TP of MYR7.00 (+3%), pegged on unchanged 17x CY16 PER and backed by 3+% yield.
What’s New
Post its analyst briefing, we remain positive on Globetronics with more clarity on its recent results and business outlook. Takeaways:
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2Q15 results included start-up costs of ~MYR3m for 3D-imaging sensors; to commence test production of 5m units/month in Oct 2015. Full-scale production of >30m units/month to begin end- 1Q16. MYR60m in capex allocated (MYR30m already spent) for a total capacity of 40m units/month.
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Revenue from quartz crystal and timing devices division to grow ~12% YoY in 2H15 from new product outsourcing by Epson while LED division is expected to contract by 10%-15% in FY15.
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Management expects 3Q15 results to be flattish before seeing some pick-up in 4Q15 earnings from maiden contribution from the 3D-imaging sensors. Second interim and special dividend to be announced in Aug 2016 (estd.~10sen per share).
FY16 revenue contribution from sensor division is expected to hit ~58% (from estd. 41% in FY15) with the launch of its two new products. We see upside to our forecasts in terms of ASPs for the two new products given higher product complication (5-die module each vs 2-die module for existing proximity and wearable sensors).
What’s Our View
Raise our FY16/17 earnings forecast by 3%/5% respectively, having incorporated contribution for its healthcare sensors. We expect Globetronics to ship out 3.5m units/month from April 2016 onwards for this product. BUY Globetronics for its growth prospects and decent yields.
Source: Maybank Research - 31 Jul 2015