Advancer Global - DBS Research 2016-08-25: Defensive business with growing margins

Advancer Global  - DBS Vickers 2016-08-25: Defensive business with growing margins ADVANCER GLOBAL LIMITED 43Q.SI

Advancer Global - Defensive business with growing margins

  • Integrated manpower solutions and facilities management services provider. 
  • Growth via acquisition and margins enhancement. 
  • Asset-light business model; positive cashflow generation to support 50% dividend payout. 
  • Fair value of S$0.50 offers potential upside of 24%.



The Business 


Defensive business. 

  • Advancer Global is in a fairly defensive business of offering necessity services, including workforce solutions, cleaning & stewarding and security services. These services are needed in both good and bad times.

Growth via acquisition and margins enhancement. 

  • Growth strategies include acquiring niche business and moving up the value chain to improve profitability. 
  • The facilities management services segment, which include cleaning & stewarding and security services, is a very fragmented market with numerous small players, which is ideal for bigger players like Advancer Global to make acquisitions to consolidate its position. 
  • The recent acquisition of a security training and technology consultancy firm enables the group to scale up to the higher margins security services.

Asset-light; positive cashflow generation. 

  • Advancer Global’s total non-current assets account for only about 10% of total assets as at end-Jun 16. 
  • The positive cashflow trend in the past few years is expected to continue; thus enabling the group to support an expected 50% dividend payout for the next few years.


The Stock 


Fair value of S$0.50. 

  • We believe a 15x FY17F PE valuation is fair, as Advancer Global is one of the few bigger facilities management services providers here. The valuation peg is based on a slight10% discount to Denmark-listed ISS’s FY17F valuation, given its much smaller size. Fair value works out to S$0.50 per share, which translates to a potential upside of 24% from the current price.

Key risks: 

  • Affected by laws, regulations, policies and market forces.


NOT RATED
Return *: 1
Risk: Moderate
Potential Target 12-mth*: 12-Month S$ 0.50 (24% upside)




Lee Keng LING DBS Vickers | http://www.dbsvickers.com/ 2016-08-25
DBS Vickers SGX Stock Analyst Report NOT RATED Maintain NOT RATED 0.50 Same 0.50

*This Equity Explorer report represents a preliminary assessment of the subject company, and does not represent initiation into DBSV’s coverage universe. As such DBSV does not commit to regular updates on an ongoing basis. The rating system is distinct from stocks in our regular coverage universe and is explained further on the back page of this report.


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