Global Invacom Group - RHB Invest 2016-02-26: Back Into Profitability In FY16

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GLOBAL INVACOM GROUP LIMITED QS9.SI 

Global Invacom Group - Back Into Profitability In FY16 

• FY15 has been a cleanout year for Global Invacom, affected by all the oneoff legal/acquisition fees, coupled with order delays as key customers cleared inventory. 
• Yet, we expect the firm to slam back into profitability, especially in 2H16, on a demand surge from satellite launches, Skyware Global’s turnaround, new technology changes and entry into new markets. 
• To be conservative, though, we lower our NPAT forecasts, resulting in a lower SGD0.28 TP (from SGD0.40, 100% upside) derived from a FY16F P/E of 13.5x and 0.85x P/BV. 
• Maintain BUY. 

Major customer EchoStar undergoing technological change on the digital channel stacking (DCSS) front. 

• With the new DCSS, one can record any show in one of the set-up boxes and mirror it to any television unit with a connection around the house. 
• Also we learned that Global Invacom is currently undergoing qualification for the new technology and we understand that any approval is likely to only happen in 2H16. If qualified, this could contribute a significant boost of around USD2m-3m to NPAT on higher margins enjoyed by the new model products sold. 

Skyware Global turnaround. 

• Global Invacom has restructured the top management team, with the site also undergoing renovations currently to beef it up to standard in order to qualify for more products and customers. 
• In addition, it is consolidating existing logistics and warehouse functions at the North Carolina plant, and also the sales team across the board. 
• We expect Skyware Global to start contributing positively to group bottomline in FY16. 

Back to profitability in FY16 – 2H16 to be the key. 

• Without all the one-off costs dragging it down, we expect Global Invacom to bounce back into profitability in FY16, especially in 2H16, where it would know if it was qualified by EchoStar. 
• Maintain BUY with a SGD0.28 TP derived from a FY16F P/E of 13.5x (a multiple at a 35% discount to the 20.5x P/E average of its peers).

Jarick Seet RHB Invest | http://www.rhbinvest.com.sg/ 2016-02-26

RHB Invest SGX Stock Analyst Report BUY Maintain BUY 0.28 Down 0.40