Posted by mirinjung > 2014-08-21 13:36 | Report Abuse

We initiate coverage of Global Invacom (GI) following its recent admission
to AIM and placing. GI is a leading global supplier of ground equipment in
the satellite communications market. Its expansion has come from a
combination of strong organic growth as well as increased critical mass
from acquisitions. The group’s valuation remains substantially lower than
many of its international peers, and the AIM li sting, couped with greater
share liquidity, should provide a platform for investors to ride a potential
rerating as well as enjoy strong earnings growth, derived from market
share gains in a growing market. It continues t o see its market as offering consolidation opportunities.

 Placing and introduction to AIM. The group is now dual-listed. It has added

an AIM listing to its existing listing on the Singa porean Exchange. To facilitate
growth and selective acquisitions, the group has raised £8.8m in new equity.
This represents a 19% increase in the equity base .


 Growth drivers. The ongoing adoption technology gy for HDTV, broadband and direct broadcast satellite (DBS) continues to drive satellite ground equipment growth. In addition to the underlying market grow the GI aims to increase market share overall with a focus on growth in Asia, helping to diversify its customer base. New products, new territories and new customer relationships will all drive market share growth. The group will leverage its reputation for innovative new products, with facilities in the UK, Malaysia and China providing manufacturing flexibility and an integrated supply chain. Management has built the group through a series of acquisitions and aims to achieve further market share growth, targeting smaller players in a fragmented market
Valuation, The shares trade on a P/E rating of 10.2x in 2015, a significant discount versus its international peers in the satellite broadcast equipment market on 13.7x and UK electronic equipment peers on 13.9x in 2015. We believe there is significant scope for a re-rating as well as ongoing above average expectations. We set a fair value target at a peer group average 13.8x 2015 earnings, which generate a target price of 29.0p. The current discount of 27% should dissipate over time as the group moves closer to its peer group average rating. As such , this offers significant upside.