Sometimes value investing cannot work...Therefore Step 5 is very important to escape from the risk if we able to predict the outlook well. But, of course very difficult.
Globetronics
Fresh guidance from management. 1Q16 operating profit will be down 30+% due to weak demand from Heptagon as end customer rationalize their inventory. 2Q16 outlook for the proximity sensor also does not look good (10m units per month or below from 13m units per month in 1Q16); management doesn't discount that there could be a new competitor producing the proximity sensor or a design out (meaning a new sensor replacing the proximity sensor).
As for the 3D imaging sensor, adoption in 2016 model now seems unlikely with low volume forecast by client. 2017 adoption is more likely according to Heptagon.
Globetronics is one of the street's top pick with consensus earnings now at risk. Our forecast is on the lower range at MYR93m but still there is downside risk of about 30-40% should proximity sensor volume falls to 10m per month going forward and zero adoption of 3D imaging sensor.
1Q16 results will be released tomorrow. Share price has already started to react to this.
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