Globetronics : Sensors to be major contributor

PETALING JAYA (Jan 20, 2014): Penang-based semiconductor player Globetronics Technology Bhd, which was founded by Michael Ng Kweng Chong, once one of the wealthiest men in Malaysia, now expects half of the group revenues to be contributed by the sensor segment in the next two years.

Ng, 65, who is the executive chairman of Globetronics, made it to the list of Malaysia's 40 richest business people about 10 years ago, as compiled by Malaysian Business. However, the name of this low profile billionaire no longer appears in the latest compilation or the Forbes List.

Globetronics CEO Heng Huck Lee (pix) told SunBiz in an email interview that on top of continuously improving the financial numbers of sales, profit and market capitalisation, it is Ng's ultimate wish to see Globetronics, a 100% local company, to continue evolving into a multinational corporation (MNC) equivalent company showcasing Malaysia's capability to compete and excel globally.

The group plans to spend RM40 million to RM50 million on capital expenditure to develop its three main revenue contributors - quartz timing devices, light-emitting diode (LEDs) and sensors - for the financial year ending Dec 31, 2014 (FY14).

"We expect the contribution ratio of the sensor and new technology products to expand to 45-50% of the group revenue before 2016, " said Heng.

Currently, the company's "traditional" semiconductor business only contributes about 12% of Globetronics' revenue, but quartz crystal and timing devices business make up as much as 37%, while LEDs business and sensors business each contribute 25% of the group's revenue.

"We have been building up our new product technology and customer base steadily over the past few years, naturally moving away from the standard semiconductor business, shifting the focus towards timing devices, LEDs and sensors which currently combined make up more than 85% of our revenue base," said Heng.

He added that Globetronics' customers for its three key revenue segments are market leaders in their respective industry.

"Our client base consists of global multinationals from US, Europe, Japan and Switzerland who are market leaders in their respective segments. We have three of the top four LED makers in the world and the world's largest quartz timing devices maker in our customer list," Heng continued.

The future prospects of Globetronics remains strong Heng said, as its products have penetrated into the growing markets of smart phones, tablets, automotive and consumer electronics.

Further to that, LEDs and sensors as well as new imaging products will continue to show a lot of promising growth as the applications into various areas like gesture, contactless, wearable smart devices are expected to grow and expand at double-digit growth rates.

According to various global semiconductor forecast and projection, the industry is expected to see a 5% to 8% growth in 2014, with the highest rates coming from the smart devices, LEDs and sensors, said Heng.

"We are hopeful to produce double-digit growth in FY14, mainly due to our healthy pre-positioning in these areas," he said.

Globetronics saw its net profit increase by 55% to RM41.35 million in FY12, while its revenue grew at 9% to RM290 million. The group's first nine months ended Sept 30, 2013 (9M FY13) saw net profit rise by 31% to RM39.52 million, on the back of a jump in revenue of 19% to RM242.26 million.

On another note, Heng said it is unlikely to benefit from a speed up in migration of conventional light (especially incandescent light bulb) to LED lighting due to the electricity tariff hike this year, as less than 1% of its total sales are in the local market.

However, Globetronics could benefit indirectly if its LED components are used in LEDs light fixtures that could be adopted by assemblers selling locally, he added.

Globetronics, which has an institutional investor base of 25% to 30%, saw Lembaga Tabung Haji (LTH) cease to be a substantial shareholder on May 28, 2013, after disposing 3.5 million shares in the open market.

"Based on the disclosures, it seems to us that they have rebalanced their portfolio across all industries in Bursa Malaysia as of late and Globetronics is not the only one," Heng explained. Globetronics is a shariah compliant stock.

Heng said on a scale of one to 10, where 10 is best or perfect, he rated Globetronics an 8, basing it on its own targets and past accomplishment, compared with its peers as well as its financial achievement.

"There is no room for complacency, as there are still many more areas for us to improve and grow. (However), it would be a perfect score if we achieve our target in 2016 ahead of time," he concluded.

Globetronic's shares closed unchanged at RM3.35 last Thursday. In the last one year, the stock has gained some 98%.