Global Invacom Group - RHB Invest 2016-08-05: Turnaround Validated, Profits To Come In 2H

Global Invacom Group - RHB Invest 2016-08-05: Turnaround Validated, Profits To Come In 2H 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:
    1. The contribution of the turnaround of Skyware Global;
    2. The launch of the new satellite Jupiter 2 by end-2016;
    3. 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 | http://www.rhbinvest.com.sg/ 2016-08-05
RHB Invest SGX Stock Analyst Report BUY Maintain BUY 0.28 Same 0.28


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