GTRONIC – Fundamental Analysis (3 Aug 2015)

GTRONIC Analysis:-

Excel – http://1drv.ms/1KL06oG

Notes – http://tinyurl.com/mtp76p4

My View:-

  • Valuation
    • 5Y DCF
      • Good Scenario (27.0% – 29.0%): From 7.18 to 7.62 (Uncertainty Risk: MEDIUM)
      • Base Scenario (25.0%): 6.77 (Uncertainty Risk: MEDIUM)
      • Bad Scenario (21.0% – 23.0%): From 6.01 to 6.38 (Uncertainty Risk: HIGH)
      • Ugly Scenario (17.0% – 19.0%): From 5.33 to 5.66 (Uncertainty Risk: VERY HIGH)
      • At current price (6.13), based on RDCF, assumption of FCFF growth rate in the next 5 years is 21.6%.
    • Absolute EY%:
      • Trailing:
        • FY14 (EPS: 0.229) – 3.71 (Uncertainty Risk: EXTREME)
        • R4Q (EPS: 0.249) – 4.03 (Uncertainty Risk: EXTREME)
      • Forward:
        • FY15 (EPS: 0.275 ± 5%) – From 4.22 to 4.67 (Uncertainty Risk: EXTREME)
        • FY16 (EPS: 0.379 ± 5%) – From 5.81 to 6.43 (Uncertainty Risk: HIGH to VERY HIGH)
      • EPS applied to reach the current stock price (6.13): 0.379
  • GTRONIC reported 1H15 earnings of RM35.1m, an increase of +11.7% yoy.
    • The improvement in earnings was mainly attributable to:
      • Higher volume loadings from most of the group’s customers;
      • Better economies of scale
      • Productivity improvement and cost control programme
    • The group reported 1H15 revenue of RM177.7m. This translates into a marginal increase of +2.1%yoy. The growth in revenue was mainly supported by the Singapore segment. However, the rise in revenue was partially negated by the lower revenue from the Malaysian segment.
    • Segment revenue from Singapore grew at the fastest pace at +37.6%yoy to RM74.4m as compared to other market segments. This lead to a +41.5%yoy surged in the segment profit to RM15.3m. Due to higher volume loading (higher production), the segment has also managed to maintain its segment profit margin above 20%.
  • GTRONIC shows its ability to keep pace with the market demand by strategically positioning itself within the value chain. This has translated into steady earnings growth. At present, the group has identified the sensor business as the catalyst of growth.
  • GTRONIC has been consistently delivering steady earnings growth by keeping pace with market demands. This was shown in its latest quarterly results announcement. With a growing cash pile, the company mostly will continue its attractive dividend payouts. I believe that there is still slight room for the stock to appreciate further with expectation on another solid year ahead in FY15.
  • Dividend Yield is around 4%, not bad. However, valuation wise, GTRONIC is not attractive.

Latest Financial – Q2 2015 Financial Report (28 Jul 2015) http://www.bursamalaysia.com/market/listed-companies/company-announcements/4812585

At the time of writing, I did not own shares of GTRONIC.

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