IPS Securex Holdings - Heavily Focused On 2HFY17
- We believe the bulk of IPS earnings delivery would be heavily weighted towards 2HFY17, with the majority of revenue recognition only occurring then.
- We expect sales – comprising USD12m of PepperBall-related and USD3m of Hyperspike-related products – to be recognised in 2HFY17.
- In light of the higher opex due to the Yatai acquisition, we lower our FY17F NPAT by 15%. This results in our DCF-backed TP being lowered to SGD0.34 (from SGD0.40, 113% upside), which implies 13x FY18F P/E. However, we still remain optimistic on its outlook and maintain our BUY call on this counter.
Pre-payment plan in place.
- We understand that a customer for IPS Securex’s (IPS) receivables has signed an agreement subsequent to the year end for instalments to be paid from Aug 2016-Sep 2018.
- IPS received an initial payment of SGD700,000 in Aug 2016. This payment would allow IPS to pare down its trade receivables.
- At the same time, it would enable the client to place a larger order with the firm, which would drive earnings in 2HFY17 (Jun).
Contracts are more heavily weighted towards 2HFY17.
- We expect sales – comprising USD12m of PepperBall-related and USD3m of Hyperspike-related products – to be recognised in 2HFY17. As a result, the majority of IPS’ revenue is likely to be only recognised during this period. This would result in its earnings to be heavily proportioned in 2HFY17.
Maintain BUY, with a lower DCF-backed SGD0.34 TP (from SGD0.40).
- In light of the higher opex due to the Yatai Security & Communications Pte Ltd (Yatai) acquisition, we lower our FY17F NPAT by 15%. This results in our DCF- backed TP being lowered to SGD0.34, which implies 13x FY18F P/E.
- However, as we still remain optimistic on its outlook, coupled with a jump in earnings, we maintain our BUY recommendation on this counter.