Excerpts from analyst's report

RHB Research analyst: Jarick Seet

GlobalInvacom8.15We are convinced of its strong turnaround in 2H16, especially in the absence of a post-acquisition one-off cost of Skyware Global at USD0.55m.

Maintain BUY with an unchanged SGD0.28 TP (154% upside).

We believe that these factors would likely drive a strong turnaround: 

1. The technology shift in the satellite ground equipment industry; 
2. The demand surge from satellite launches; 
3. Turnaround of Skyware Global; 
4. Entry into new markets. 

Global Invacom
Share price:
11 c
28 c

Echostar’s technological change in 4Q16. With the new digital channel stacking (DCSS), one can record any shows in one of the set up boxes and mirror it to any television unit with a connection around the house.

However, we understand that Global Invacom is currently undergoing qualification for their new technology.

Narrowing losses - Turnaround in 2016
JarickSeet11.14"1Q16’s net loss narrowed by 29.9% YoY to USD0.65m resulting from the one-off cost. However, we expect GIobal Invacom to bounce back into profitability in 2H16. Particularly if qualified by its major customer Echostar, it would be a big positive for the company. Maintain BUY with a SGD0.28 TP, implying a 13.5x FY16F P/E and 0.85x P/BV."

-- Jarick Seet (photo)

We understand that any approval would likely only happen in the 4Q16. If qualified, this would likely contribute a significant boost of around USD2m-3m to its NPAT due to higher margins enjoyed by the new model products sold.

Another positive news is that Echostar has reduced its working suppliers/partners of this new technology from four to only two, namely Global Invacom and Microelectronics Technology Inc (MTI). This translates to a bigger cut for Global Invacom.

No one-off post-acquisition cost from 2Q16 onwards. Going forward, management expects the majority of the one-off cost relating to the acquisition of Skyware Global to be realised in 1Q16. It does not expect any more of such costs to be a drag on its future quarter earnings.

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