RHB Securities 2015-08-28: Global Invacom Group - Completion Of Skyware Global.

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GLOBAL INVACOM GROUP LIMITED QS9.SI

Completion Of Skyware Global 

• Global Invacom announced that it officially completed the acquisition of Skyware Global on 24 Aug 2015 and delivered the CDP share transfer forms of 27.96m shares. This means that it is allowed to start purchasing treasury shares again, which it did on 26 Aug 2015, buying back another 7m shares at an average price of SGD0.22. 
• Maintain BUY and SGD0.45 TP (11x FY16F P/E, 114% upside), as we are optimistic on a strong 2H15 turnaround. 

 Acquisition completed. 

• Global Invacom (GInva) announced that it officially completed the acquisition of Skyware Global (Skyware) on 24 Aug 2015 and delivered the Central Depository (CDP) share transfer forms of 27.96m shares. It has also appointed Mr Gregory Knox Jones, who is also on the board on Skyware, as non-independent non-executive director of the company with effect from 24 Aug 2015. 

 Share buyback started – 7m shares purchased. 

• After the completion of Skyware, GInva is allowed to start purchasing treasury shares again, which it did on 26 Aug 2015, buying back another 7m shares at an average price of SGD0.22. We expect management to continue doing share buybacks in the future as management still thinks the company’s shares are significantly undervalued at such price levels. 

 Strong turnaround ahead. 

• FY15 performance may be dragged down by a delay in sales to its major customers, due to a change in procurement procedures and some one-off costs such as the acquisition of Skyware which is currently in a loss-making position. However, with: 
  1. an expected increase in demand due to a major customer launching two new satellites in FY16, 
  2. Skyware close to breaking even and should be profitable by FY16, 
  3. GInva being able to supply both dishes and low noise blocks (LNBs) to its largest customer, and 
  4. its replacement cycle due, 
• we expect GInva to outperform with an approximately 7x NPAT surge in FY16. 
• We think that current price levels are a steal and given potential positive catalysts ahead, coupled with 40% of its market cap in net cash, we maintain our BUY call with a 11x FY16F P/E TP of SGD0.45.

Jarick Seet | http://www.rhbgroub.com/ RHB Securities 2015-08-28

BUY Maintain BUY 0.45 Same 0.45