KLCI : 1,776.82
Price Target : 12-Month RM 3.50
Scaling new heights
Roadshow indicates strong interest in Group
Key catalysts: TCXO capacity expansion and potentially > 75% payout of FY13 NI
Valuation attractive at 11-13x FY14-15F EPS, supported by 6-7% net yield and 23-24% ROE
Maintain BUY with RM3.50 TP
Impressive growth prospects. Our roadshow with Globetronics in Hong Kong was well-received because the Group has been consistently profitable and offers growth potential as its niche products are used in smartphones and tablets. FY13-14F EPS growth is intact at 22-25% and may be the base case scenario given additional earnings from proximity sensors and TCXO (temperature compensated frequency devices).
Key catalysts. Key takeaways from the roadshow are: i) Possible ramp-up of TCXO product capacity to 15m units/month (from 10m); we assumed 9m-11m units in FY13-15 forecast, ii) Potentially higher dividends: the Group may pay out more than our assumption of 75% of FY13 net income, to reward shareholders (9 sen dividend payment will go ex on 16 Oct), and iii) Globetronics is exploring and widening product applications in several industries such as automotive and agriculture, especially LED/lighting components. Also, volume loading remains healthy for its LED, timing devices and proximity sensors.
Maintain BUY, RM3.50 TP. Our TP is pegged to 15x FY14F EPS. Valuations are attractive at 11-13x FY14-15F EPS, supported by 6-7% net yield (75% payout ratio) and 23-24% ROE.
Publish date: 08/10/13