Global Invacom Group - RHB Invest 2016-05-13: Gunning for a Turnaround In 2H16

Global Invacom Group - RHB Invest 2016-05-13: Gunning for a Turnaround In 2H16 GLOBAL INVACOM GROUP LIMITED QS9.SI 

Global Invacom Group - Gunning for a Turnaround In 2H16

  • We are convinced of its strong turnaround in 2H16, especially in the absence of a post-acquisition one-off cost of Skyware Global at USD0.55m. 
  • Maintain BUY with an unchanged SGD0.28TP (154% upside). 
  • We believe that these factors would likely drive a strong turnaround:
    1. The technology shift in the satellite ground equipment industry; 
    2. The demand surge from satellite launches;
    3. Turnaround of Skyware Global;
    4. Entry into new markets.

Echostar’s technological change in 4Q16. 

  • With the new digital channel stacking (DCSS), one can record any shows in one of the set up boxes and mirror it to any television unit with a connection around the house. However, we understand that Global Invacom is currently undergoing qualification for their new technology. 
  • We understand that any approval would likely only happen in the 4Q16. If qualified, this would likely contribute a significant boost of around USD2m-3m to its NPAT due to higher margins enjoyed by the new model products sold. 
  • Another positive news is that Echostar has reduced its working suppliers/partners of this new technology from four to only two, namely Global Invacom and Microelectronics Technology Inc (MTI). This translates to a bigger cut for Global Invacom.

No one-off post-acquisition cost from 2Q16 onwards. 

  • Going forward, management expects the majority of the one-off cost relating to the acquisition of Skyware Global to be realised in 1Q16. It does not expect any more of such costs to be a drag on its future quarter earnings.

Narrowing losses – Turnaround in 2H16. 

  • 1Q16’s net loss narrowed by 29.9% YoY to USD0.65m resulting from the one-off cost. However, we expect GIobal Invacom to bounce back into profitability in 2H16. 
  • Particularly if qualified by its major customer Echostar, it would be a big positive for the company. 
  • Maintain BUY with a SGD0.28 TP, implying a 13.5x FY16F P/E and 0.85x P/BV.

Jarick Seet RHB Invest | http://www.rhbinvest.com.sg/ 2016-05-13
RHB Invest SGX Stock Analyst Report BUY Maintain BUY 0.28 Same 0.28