Valuations remain undemanding; maintain BUY
1Q22 results were below expectations owing to lower volume loading of
its gesture/light sensor products, in addition to the expected 1H
seasonality weakness. Nonetheless, we are maintaining our BUY call, TP
(pegged to 27x FY23 PER, at the LT mean) and earnings forecasts at this
juncture, underpinned by undemanding valuations and favourable industry
prospects. GTB also has solid net cash balances (26 sen/share) and a
potential DY of c.5-6% in FY22-24; accumulate on weaknesses.
QoQ dragged by seasonality, but YoY drop surprises
Excluding EIs of MYR0.4m, GTB’s 1Q22 core net profit came in at MYR9.0m
(-21% YoY, -49% QoQ) at just 16% of our/the street’s FY22 CNP estimates.
The steep sequential/QoQ drop in earnings is to be expected as 1H tends
to be seasonally weaker, but the YoY softness was a negative surprise.
Volume loading takes a hit from China lockdowns
GTB’s 1Q22 turnover/EBIT declined 23%/21% YoY from a reduction in
volume loading by its gesture and light sensor (62% revenue contribution;
flat YoY) customers due to lockdowns in China towards the end of March.
Positively, mgmt has guided that volumes are expected to pick-up in 2Q22
based on current order forecasts. The top-line was also dragged by the
absence of c.MYR2m in QCTD orders in the FY21 corresponding quarter
owing to the gradual unwinding of the segment’s ops in 3Q/4Q21. Despite
reduced economies of scale, EBIT margins marginally improved by 1% YoY.
IoT sensors to spearhead growth in FY23-24
Although the results seem lacklustre, we remain sanguine on GTB’s
prospects on undemanding valuations (currently trades at -2SD below
mean) and improving industry prospects, with a slew of next-gen
light/gesture sensors set to enter mass production by end-2Q22. Mgmt is
also focused on four other IoT sensor projects in hand that could further
boost earnings in FY23-24. Allied Market Research posits that the IoT
sensor market is expected to grow at a 10y CAGR of 28.1% through to 2030,
with APAC set to be the largest contributor in this rapidly growing market.
Maintain BUY call, TP and earnings forecast, pending further updates.