Global Invacom Group - RHB Invest 2017-05-11: Bounced Back Into Profitability

Global Invacom Group - RHB Invest 2017-05-11: Bounced Back Into Profitability GLOBAL INVACOM GROUP LIMITED QS9.SI

Global Invacom Group - Bounced Back Into Profitability

  • Ginva bounced back into profitability in 1Q17, driven by its US subsidiary, as well as sales of its next-generation LNBs. 
  • With increased sales volumes and wider margins thanks to its new-generation products that would be incrementally sold throughout the year, we expect its revenue and margins to keep on improving going forward, as it continues to roll out new-generation equipment. 
  • With bumper quarters projected ahead and a brighter outlook, we keep our BUY recommendation and SGD0.26 TP (57% upside), based on 2017F P/E of 12x.

Higher margins and volumes. 

  • Echostar, one of Global Invacom’s (Ginva) largest customers, has approved its Eastern Arc Twin Generation 2 Hybrid product, which uses digital channel stacking system (DCSS) technology. 
  • As Ginva is one of only two suppliers to Echostar for this new-generation product, we expect it to benefit from this replacement cycle.
  • Since the new product was launched only recently in 4Q16, we expect its sales volume to continue growing going forward. We are also projecting higher margins for the new model, compared to the current version. 
  • Ginva expects to deploy the DCSS technology across its low-noise blocks (LNBs) for all customers and territories over the next 12 months, and expect sales to increase throughout the year.

Bounced back strongly to profitability. 

  • Ginva reversed a USD0.7m loss in 1Q16, to a USD0.6m NPAT in 1Q17, driven by its US subsidiary that designs and manufactures antennas for broadband and satellite. Sales for its next-generation LNBs have also commenced as global broadcasters began transitioning to the latest DCSS-based solutions. 
  • Gross profit margin increased to 21.9% compared to 18.5% the previous year, helped by ongoing improvements in manufacturing efficiencies, specifically at Global Skyware in the US, whilst lower research and development (R&D) costs on the weakened GBP have helped lower costs in the UK.

To ship world’s first iridium/GPS repeater for aircraft hangers. 

  • Foxcom, one of its R&D and manufacturing arms, would be shipping its low-cost iridium/GPS repeater to a leading international airline for installation at one of its aircraft hangars at the end of May. 
  • The repeater, which debuted in Oct 2016, is the latest solution for aircraft hangars in the highly successful range of iridium and GPS repeaters that Foxcom launched in 2013. Iridium satellite equipment is used worldwide but has traditionally been limited to outdoor use.

Turnaround validated – Maintain BUY. 

  • With a turnaround now validating our confidence in the company’s fundamentals, we are expecting bumper quarters ahead and a brighter outlook for Ginva, due to the various growth factors mentioned above. 
  • We remain positive on Ginva and maintain our BUY recommendation and TP of SGD0.26, which is based on 2017F P/E of 12x.

Jarick Seet RHB Invest | http://www.rhbinvest.com.sg/ 2017-05-11
RHB Invest SGX Stock Analyst Report BUY Maintain BUY 0.260 Same 0.260