Oct[3] - G Invacom (Potential Turnaround)

COUNTER: Global Invacom Group Limited

OVERVIEW:
Listed on SGX (2012) and AIM market of London Stock Exchange (2014), the group is a designer and manufacturer of fully integrated satellite communications ground equipment ("SGE"). It is one of seven companies worldwide involved in R&D, design and supply of Sat Comms products to large-scale satellite broadcasters. Having 30 years track record in pioneering new products, it has now 58 patent applications and 63 granted patents.

HIGHLIGHTS:
[1] Due to technology changes in satellite sector and one-off expenses from acquisition (Skyware Global, US manufacturer), its FY2015 saw net loss of USD1.1m. In latest quarter result, 2Q16 saw revenue contribution ~USD11.3m from the new acquisition. It significantly improved the group's revenue with net gain in profit.

[2] Its R&D activity is mainly in UK, manufacturing in Asia, and clients are from US. Sales are predominantly transacted in USD.

[3] Its borrowing USD5.6m shall be settled by cash this year. No more borrowing to fulfill thereafter.

INVESTMENT THEMES:
[1] Current valuation: Book value - USD0.20 || Earning per share (2Q16) - USD0.0008
      Latest shares price ~ 0.158 translates to deep discount into book value.

[2] To address with new technical changes which caused de-stocking among existing clients (impact to loss of FY2015), the group has completed its research and development for new solution. Pending for qualification approval, management indicated confidence to improve sales and access wider customer base.

[3] The group has secured new orders from major telecommunications service providers and suppliers in US and Indonesia. a leading US broadcaster will launch two satellites later this year. All these factors could contribute to exciting FY2016.

PRICE TREND:
Accumulation activities were spotted during last April and June. Price broke up from 0.124 with significant volume on early July. Strong support at 0.144 afterwards. Accumulation activities are still undergoing as highlighted in below chart. Interestingly, recent mid-small cap counters rally were mostly seen with similar price volume movement. It would be hard to exempt the counter from expectation of second breakup.