Excerpts from analyst's report

DBS Vickers analyst: Paul Yong, CFA

check1.16Quality control: Visual inspection of all products to ensure they are in accordance with customers’ requirements. NextInsight file photoInitiate with BUY with 21% upside to TP of S$1.01; Beneficiary of automotive megatrend towards safety and eco-efficiency. Innovalues is a beneficiary of raising awareness and stricter regulatory standards on safety and emissions, as it is a key supplier to Sensata, a leading global producer of automotive sensors.

As Innovalues taps into the underpenetrated Chinese automotive sensor market alongside Sensata, we project earnings to grow by 30% from S$23m in FY15 to S$30m in FY17F on 30% revenue growth (from S$114m in FY15 to S$148m in FY17) and modest improvement in margins.

Beyond the automotive segment, the long-term multi-sector application potential of sensors also bodes well for Innovalues. Beyond automotives, the global smart sensor market is expected to grow at a 9.9% CAGR from c.US$80bn in 2013 to nearly US$154bn in 2020. Through partnerships with Sensata and TE Connectivity, leading producers of sensors, Innovalues also hopes to venture into the industrial segment, which could be the next leg of growth.

paulyong dbsValuation: Our 12-month TP of S$1.01 offers potential upside of 21%. Our TP of S$1.01 for Innovalues is based on 12x blended FY16/17F PE, which implies a discount of 20% to peers' average PE of c.15x blended FY16/17F earnings.  Its share price should re-rate as the Group ramps up on production and as earnings growth is delivered.
-- Paul Yong, CFA (photo)

Cost advantages and focus on operating efficiency and productivity improvements to drive earnings. Innovalues’ ability to customise machines and tools in-house enables the company to operate more efficiently than its peers. As its ongoing automation efforts are subsequently rolled out, we expect a boost to EBIT margins from 19% in FY15 to 22% in FY17F on enhanced productivity.

Key Risks to Our View: Slowdown in global automotive sales could weigh on AU segment.  As the automotive segment makes up a significant proportion of Innovalues’ business, a significant slowdown in the global auto market could weigh on the segment’s outlook.

You may also be interested in:

You have no rights to post comments

Counter NameLastChange
AEM Holdings2.650-0.080
Avi-Tech Electronics0.265-
Best World1.700-0.120
Broadway Ind0.087-0.002
China Sunsine0.385-
Delfi Limited0.955-0.075
Food Empire1.430-0.020
Fortress Minerals0.2700.005
Geo Energy Res0.335-0.055
GSS Energy0.027-0.002
Hong Leong Finance2.480-0.010
Hongkong Land (USD)3.2800.020
ISDN Holdings0.330-0.010
IX Biopharma0.041-
Jiutian Chemical0.025-
KSH Holdings0.250-
Leader Env0.052-
Medtecs Intl0.133-0.001
Nordic Group0.340-0.010
Oxley Holdings0.0910.001
REX International0.1230.002
Sinostar PEC0.1420.004
Southern Alliance Mining0.600-
Straco Corp.0.515-
Sunpower Group0.2250.005
The Trendlines0.083-0.001
Totm Technologies0.024-0.001
Uni-Asia Group0.8500.010
Wilmar Intl3.340-0.020
Yangzijiang Shipbldg1.7400.070

We have 805 guests and no members online

rss_2 NextInsight - Latest News