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24-08-2015, 09:03 AM
Initiation report from RHB
We initiate coverage on Global Invacom (GInva), a manufacturer cum
supplier of satellite TV and cable peripherals products with a SGD0.45
TP (implying a FY16F P/E of 9.8x), representing 105% upside potential
return and recommend BUY. We like Ginva as it operates in a sector
with high barriers to entry and also it owns the patents to its products.
We think the current price level and EPS hit rock-bottom and expect a
strong turnaround in FY16, due to at least 1) demand surge from new
satellite launches 2) potential Skyware turnaround 3) cross-selling of
products and 4) a new generation product.
Strong turnaround ahead. The performance in FY15 may be dragged
down by a delay in sales to its major customers, due to a change in
procurement procedures as well as a few one-off costs such as the
acquisition of Skyware Global (Skyware) which is currently in a loss
making position. However, with its i) expected increase in demand due
to major customer launching two new satellites in FY16, coupled with
the fact that ii) Skyware is close to breaking even and should be
profitable by FY16, as well as iii) being able to supply both dishes and
LNBs to its largest customer and iv) new generation product, we expect
GInva to outperform with an approximately 7x NPAT surge in FY16.
Share buy-backs to continue. The company has been aggressively
buying back its shares since FY13, partially due to its strategy of using
its treasury shares to fund its M&A activities. As of 2015, the company
has already bought over 26.6m shares at an average price of
SGD0.36/share, ie much higher than the existing level. Going forward,
the management highlighted that share buybacks will likely continue,
especially if they have an acquisition target. Management also owns
employee share options which have an exercise price of SGD0.31.
Serial System as a strategic partner. In June this year, Serial System
(SERL SP, NR), a proven distributor with over USD1bn of revenues in
FY14, took a 4.5% stake in GInva at SGD0.29/share. Serial System will
be involved in helping GInva improve procurement of components in
tandem with their growth strategy, which could result in cost savings.
Initiate with BUY and SGD0.45 TP. With several positive catalysts, we
expect a strong turnaround in FY16.
Key Risks: customer concentration risk (GInva derived 86% of FY14
revenues from its top 5 customers); further risks on page 8.
http://rhbosk.ap.bdvision.ipreo.com/NSig...a6c61c9349
We initiate coverage on Global Invacom (GInva), a manufacturer cum
supplier of satellite TV and cable peripherals products with a SGD0.45
TP (implying a FY16F P/E of 9.8x), representing 105% upside potential
return and recommend BUY. We like Ginva as it operates in a sector
with high barriers to entry and also it owns the patents to its products.
We think the current price level and EPS hit rock-bottom and expect a
strong turnaround in FY16, due to at least 1) demand surge from new
satellite launches 2) potential Skyware turnaround 3) cross-selling of
products and 4) a new generation product.
Strong turnaround ahead. The performance in FY15 may be dragged
down by a delay in sales to its major customers, due to a change in
procurement procedures as well as a few one-off costs such as the
acquisition of Skyware Global (Skyware) which is currently in a loss
making position. However, with its i) expected increase in demand due
to major customer launching two new satellites in FY16, coupled with
the fact that ii) Skyware is close to breaking even and should be
profitable by FY16, as well as iii) being able to supply both dishes and
LNBs to its largest customer and iv) new generation product, we expect
GInva to outperform with an approximately 7x NPAT surge in FY16.
Share buy-backs to continue. The company has been aggressively
buying back its shares since FY13, partially due to its strategy of using
its treasury shares to fund its M&A activities. As of 2015, the company
has already bought over 26.6m shares at an average price of
SGD0.36/share, ie much higher than the existing level. Going forward,
the management highlighted that share buybacks will likely continue,
especially if they have an acquisition target. Management also owns
employee share options which have an exercise price of SGD0.31.
Serial System as a strategic partner. In June this year, Serial System
(SERL SP, NR), a proven distributor with over USD1bn of revenues in
FY14, took a 4.5% stake in GInva at SGD0.29/share. Serial System will
be involved in helping GInva improve procurement of components in
tandem with their growth strategy, which could result in cost savings.
Initiate with BUY and SGD0.45 TP. With several positive catalysts, we
expect a strong turnaround in FY16.
Key Risks: customer concentration risk (GInva derived 86% of FY14
revenues from its top 5 customers); further risks on page 8.
http://rhbosk.ap.bdvision.ipreo.com/NSig...a6c61c9349