After announcing disappointing first quarter results on Tuesday, it was hit with a double whammy yesterday as its share price sank and research houses slashed earnings forecasts for the year.
The share price fell as much as 8.18% or 9 sen before paring its losses to settle down 5.45% or 6 sen at RM1.04, giving it a market capitalisation of RM696.22 million.
The Penang-based group saw its net profit tumble 65.08% to RM3.3 million in its first quarter ended March 31, 2023 (Q1 FY2023) from RM9.45 million a year ago. Revenue for the quarter fell by 22.67% to RM33.13 from RM42.84 million a year earlier.
It attributed the lower revenue and net profit in the current quarter mainly to lower volume loadings of products from its customers, causing a significant drop in economies of scale.
As a result, research houses have cut their earnings forecasts for the year by considerable amounts.
RHB Investment Bank lowered FY2023 full-year earnings by 39.5%, and trimmed forecasted earnings for FY2024 and FY2025 by 16.6% and 12.1% respectively.
“Lower demand for sensor products, loss of economies of scale, and increases in utilities and staff costs contributed to the dip in Globetronics’ y-o-y (year-on-year) profitability,” said RHB analyst Lee Meng Horng.
Positive catalysts lacking
On Globetronics’ prospects for the year, Lee does not anticipate any strong positive catalyst.
“The volume loadings for both the gesture and lights sensors are set to be flattish – only marginally higher into Q2 from 17-20 million currently. Meanwhile, volumes for quartz crystal timing devices show further weakness along with LED and other integrated circuits or ICs,” he said.
Separately, AmInvestment Bank Bhd cut FY2023 to FY2025 earnings by 20% to 51%, assuming more conservative sales estimates.
Its analyst Afif Zulkaplly noted the company has multiple projects in the pipeline which could contribute to the recovery in earnings, on top of the broader market turnaround.
“The group is in the midst of co-developing next-generation sensors with one of its customers.
“The stock looks unattractive at the current level of 17x (times) FY2024 forecasted price-earnings ratio (PE), above its five-year mean of 16x PE,” he added.
Upside and downside risks to Globetronics’ prospects include a potential softening or strengthening of smartphone and peripheral sales, changes in the ringgit’s strength and major customer wins or losses.
RHB trimmed its target price (TP) to RM1.01 from RM1.05 and maintained its “neutral” call, whilst AmInvest retains a “hold” rating and reduced its TP to 99 sen from RM1.12.