IPS Securex Holdings - RHB Invest 2016-08-24: The Worst Is Over; Record FY17F Ahead

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IPS SECUREX HOLDINGS LIMITED 42N.SI

IPS Securex Holdings - The Worst Is Over; Record FY17F Ahead.

• We expect IPS Securex (IPS) to book a record performance in FY17 (Jun) and think its current share price has currently bottomed. 
• While FY16 results were impacted by a delay in Pepperball orders and a delay in the recognition of its USD2.5m Hyperspike order, these problems will cease to exist in FY17. In fact, most of the orders spilling over will further boost its FY17F NPAT. 
• We expect the pepperball payment and orders to start flowing in FY17F, as well as more orders for its Hyperspike-related products after securing its USD64m contract. 
• Maintain BUY.

Pepperball orders will be back-rolled in FY17. 

• We understand that there has been a delay in terms of orders as well as payment of Pepperball products, which led to a dismal FY16. However, we understand from management that it has found a solution in terms of payment method and orders from this government, and orders should continue to resume in FY17. 
• We expect IPS to recognize at least USD15m in Pepperball orders in the next financial year.

Hyperspike delivery orders on track, with potential new order wins incoming. 

• In Dec 2015, IPS announced a major contract win of USD64m to supply a certain government with Hyperspike-related products in South-East Asia for five years. With the announced partial orders (PO) thus far, management expects Hyperspike POs to continue in Oct 2016 as well as Jan 2017. 
• In addition, we understand that it is in talks with other countries to supply them with Hyperspike-related products as well. Thus, more potential contract wins can be expected in the next few months.

Maintain BUY, due to a record FY17 expected ahead. 

• We believe that the worst is over and its current share price has bottomed due to a record FY17 anticipated ahead. 
• Airports of Thailand has already awarded its main contractors with contracts and the tender for the scanning systems will likely open again by the end of 2016. 
• Our TP of SGD0.40, implies 14x FY18F P/E.

Jarick Seet RHB Invest | http://www.rhbinvest.com.sg/ 2016-08-24

RHB Invest SGX Stock Analyst Report BUY Maintain BUY 0.40 Same 0.400