Excerpts from analysts' report

UOB Kay Hian analysts: Nicholas Leow & Andrew Chow, CFA

GohLengTse9.14Goh Leng Tse, CEO of Innovalues. Photo: CompanyShare price correction brings risk-reward into more palatable territory. Our target price of S$1.06 implies a decent upside of 12.2% with a dividend yield of about 4%.

The group has reiterated in its announcements on three separate occasions on 7 Apr 16, 3 Jul 16 and 19 Jul 16 that it has appointed Rippledot Capital Advisors Pte Ltd (RCA) to conduct a review of strategic options available to the company.

While not definitive, we view this as a potential indicator of an M&A.

Based on the comparable transaction of IPE Group in Hong Kong, this would imply a fair value in excess of S$1.20 for Innovalues, or an upside of 27% based on its last traded price.

 

Innovalues
Share price: 
94.5 c
Target: 
$1.06

EARNINGS REVISION/RISK The group has guided for a stronger showing in 2H16.

The company's 1Q16 results saw weaker demand for both automobile and office automation products, primarily due to spill-over effects from a pushback in orders. The group will report its 2Q16 results on 2 August and we expect a qoq improvement.

♦ In the event of an M&A....
NicolasLeow"On our estimates, the stock offers resilient dividend yields of 3.8% and 4.5% for 2016-17F respectively. In the event of an M&A, we think the stock could trade in excess of S$1.20, which is based on the renewed mandatory conditional cash offer for IPE Group of HK$1.70 in early-Mar 16."

-- Nicholas Leow (photo) & Andrew Chow, CFA

VALUATION/RECOMMENDATION
Maintain BUY and DCF-based target price of S$1.06 but trade cautiously given the volatility in share price.

Innovalues remains one of our key mid-cap picks, given its earnings growth as well as strong financial position.

We would trade cautiously after its recent share price volatility. 

Full report here.

You may also be interested in:


 

We have 1758 guests and no members online

rss_2 NextInsight - Latest News