GLOBAL INVACOM GROUP LIMITED
QS9.SI
Global Invacom Group - Turnaround Validated, Profits To Come In 2H
- Global Invacom turned into profitability in 2Q16, validating its turnaround, as we had expected. We expect a better 2H and profits to start rolling in, especially from:
- The contribution of the turnaround of Skyware Global;
- The launch of the new satellite Jupiter 2 by end-2016;
- The technological change by major customer Echostar, who also cut down its working partners to two, from four.
- Maintain Conviction BUY and SGD0.28 TP (87% upside).
New customers and expansion of products supplied.
- We think Global Invacom will continue to expand its product range and secure new customers like it did over the past few months.
- We also expect them to venture into different geographical markets that are largely untapped, such as India and Brazil.
A better 2H awaits, profits to roll in
- A better 2H awaits, profits to roll in, especially from the contribution of the turnaround of Skyware Global, as well as the launch of Jupiter 2 at the end of the year.
- Major customer Echostar’s technological change should lead to greater sales for Global Invacom, due to the subsequent surge in demand for higher-margin next-generation products.
Turnaround is concrete.
- As of 2Q16, the company recorded earnings of USD0.2m, compared to a loss of USD1.9m a year earlier. Gross profit margin improved to 21.8% from 19.7%, due partly to a favourable product mix.
- We believe GPM will likely continue to improve, as it ramps up utilisation from more client orders.
Solid turnaround validated, bright prospects ahead.
- Turning into profitability in 2Q16 has corroborated our expectation of its turnaround. Going forward, we expect a better 2H and profits to start rolling in.
- Maintain Conviction BUY with SGD0.28 TP, implying 9x FY17F P/E.
Jarick Seet
RHB Invest
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http://www.rhbinvest.com.sg/
2016-08-05
RHB Invest
SGX Stock
Analyst Report
0.28
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0.28
