RHB Securities 2015-08-21: IPS Securex Holdings - Blasting Its Way Into FY16.

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IPS SECUREX HOLDINGS LIMITED 41E .SI

Blasting Its Way Into FY16 

• FY15 NPAT surged 102% to SGD2.3m while topline rose 25.9% to SGD15.7m on increased contributions from all business segments and a 0.75 cent dividend was declared for 2H15, representing a yield of 1.9% for FY15. 
• Keep BUY and lift our FY16F earnings by 14%, resulting in a higher SGD1.15 TP (44% upside, 7.2x FY16 P/E). 
• With the USD50m PepperBall contract already secured and more potential contract wins in the near future, we are bullish on IPS’ FY16 outlook. 

 FY15 (Jun) NPAT surged 102% YoY. 

• IPS Securex’s (IPS) FY15 NPAT surged 102% to SGD2.3m, while topline rose 25.9% to SGD15.7m due to a 19.8% increase in the security solutions business and a 38.7% rise in the maintenance and leasing business. Due to the operating leverage, net margins also improved to 14.4% in FY15 from 9% in FY14. 

 Potential special dividend in FY16. 

• IPS announced a 0.75 cents (SGD) dividend for 2H15, bringing total FY15 dividend to 1.5 cents, representing a 1.9% FY15 dividend yield. Going into FY16, we expect IPS to have a 1,054% surge in NPAT mainly due to the USD50m PepperBall contract that is to be recognised in FY16. 
• Management mentioned that it is keen to reward its shareholders with a higher dividend payout or special dividends if it delivers strong results in FY16, which we estimate to lead to a 6% FY16F yield, based on a 30% dividend payout. 

 Positive outlook ahead as we expect potential incoming contracts. 

• The spate of riots around the region, and the growing dissent and distrust amongst the populace towards certain governments help to reinforce the need for more effective non-lethal weapons like PepperBall. 
• Being the best-in-class product for mid-range crowd control, we believe PepperBall stands to benefit from the ensuing boost in demand following any increase in government budgets for such products. 
• In addition, we are also confident that IPS will go ahead to secure more orders, especially for its Hyperspike and cargo scanner products, with the expansion of six airports in Thailand. 
• With a bright outlook ahead, we lift our FY16 NPAT estimate by 14%, which increases our FY16F TP to SGD1.15 (from SGD1.01), based on 7.2x FY16 P/E. Maintain BUY.

Jarick Seet | http://www.rhbgroub.com/ RHB Securities 2015-08-21

BUY Maintain BUY 1.15 Same 1.01