GTRONIC (7022) - Holistic View of Globetronics with Fundamental Analysis & iVolume Spread Analysis (iVSAChart)

Globetronics Recent Share Price Markdown - A Concern or an Opportunity?

 

Founded in 1991, Globetronics has grown rapidly over the last 20 years from a humble 20,000 square feet rented facility to ten buildings covering more than 600,000 square feet, with over 2,500 employees.

 

The Group's principal activities are manufacturing and assembly of integrated circuits, optoelectronic products and printed circuit boards. Other activities include manufacturing and fabrication of ESD protective materials and ceramic metallisation, manufacturing of small outline components and technical plating services for the semiconductor industry, provision of hardware and software system solutions and consultations, provision of burn-in services, trading of chemical products and import and export of components and direct materials of semiconductor.

 

Manufacturing and trading segments operate principally in Malaysia, Philippines and Peoples' Republic of China. The services segment is operated solely in Malaysia. The major shareholders of Globetronics include Wiserite Sdn. Bhd. and Lembaga Tabung Haji. Globetronics was listed on the Kuala Lumpur Stock Exchange on 3 November 1997.

 

Based on Financial Year (FY) 2015 full year results, Globetronics achieved close to RM 350 million turnover, which is considered to be a mid size enterprise. Other aspects of the company’s latest financial results are illustrated in the table below.

  

Globetronics Technology Bhd	FY 2015 (RM’000)
Revenue (RM’000)	343,656
Net Earnings (RM’000)	75,262
Net Profit Margin (%)	19.7
Total Debt to Equity Ratio	0.016
Current Ratio	5.42
Cash Ratio	3.95
Dividend Yield (%)	3.068
PE Ratio	14.87

 

Since FY2011, Globetronics revenue has been in a growing trend from RM265 million to RM 343 million in FY2015. This represents an average year to year growth of 6.71%. Although there is a slight drop of revenue from FY2014 to FY2015, net profit growth trend was not affected.

 

Globetronics achieves a growth of 2.8 times increase in 5 years or an average year to year growth of 29.58%. Having a net profit growth rate which is much higher than the revenue growth rate is a great sign of effective cost management and increases in profit margin from year to year. For net profit margin perspective, Globetronics scores a high 19.7% which is pretty amazing for a product manufacturing company.

 

In terms of company’s debt, Globetronics has very low total debt to equity ratio of just 0.016. Such low liability of business operation model leads to good current ratio of 5.42 and cash ratio of 3.95, which are strong characteristic of being a company can withstand tough economic situations.

 

As for dividend yields, Globetronics issues a 3.068% dividend yield which is pretty good considering that the company’s dividend payout ratio is only 0.455 (45.5% of their net profit is payout to their shareholders as dividend).

 

The concern that investors need to be aware of is that the company is operating in a highly competitive and fast moving technology sector which posts ongoing challenges for Globetronics to sustain their current growth. This can be seen in the dip of recent quarterly results as well as their relatively low revenue growth rate as compared to their net profit growth rate.

 

In summary, Globetronics greatest strength in their financial results is the low debt ratio and high profit margin. The company also pays reasonable dividends and current PE ratio of 14.8 is considered to be on the low side for manufacturing sector.

 

Hence, this is an opportunity to pick up Globetronics after the recent share price markdown as the pull back is likely due to recent quarterly results being below expectations and concerns of slowdown in semiconductor industry, but not due to the company’s fundamental problems.

 

 

iVolume Spread Analysis (iVSA) & comments based on iVSAChart software – Globetronics

 

 

For Globetronics, after the registration of major sell off sign of weakness (red arrow), the market broke down from RM5.30 to RM3.40, nearly a fall of 35%. Currently, there is a spring, sign of strength (green arrow) as the panic selling has subsided. At best, this market will move sideways for the time being. Hence, we need to wait till there are some sign of strengths (green arrow) to show up in the chart first before buying.

GTRONIC (7022) - Holistic View of Globetronics with Fundamental Analysis & iVolume Spread Analysis (iVSAChart)

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