Global Invacom - Initiation of Coverage
Highly undervalued and cash generative provider of satellite ground equipment set for sharp recovery over the medium-term
Global Invacom is a fully integrated satellite equipment business which provides a complete range of satellite ground equipment and electronics to a blue-chip customer base. Its products include antennas, LNB receivers, transceivers, fibre distribution equipment, transmitters, switches and video distribution components, along with manufacturing services for the defence and healthcare sectors. The group is the world's only full‐service outdoor unit supplier, focused on the high growth Data Over Satellite market.
Globally diversified and full service satellite ground equipment specialist
Following a number of acquisitions and mergers over the years, the Global Invacom Group is now made up of a number of companies that together provide a complete solution for satellite communications, making it the world's only full‐service outdoor unit supplier. The company carries out activities from R&D through to design, manufacture and distribution of its products, with its main operations in the US, UK and Asia.
Positioned for growth in the booming Data Over Satellite/satellite internet market
The investment case is driven by the opportunity to meet an increasing global demand for data and connectivity using satellite solutions. In 2020 Global Invacom made the strategic decision to take advantage of this by focussing its product set on the Data Over Satellite market, one which is seeing significant investment from companies including Amazon and Elon Musk’s SpaceX which are launching Low Earth Orbit (LEO) satellites. In a July 2021 report, Allied Market Research valued the global satellite internet market at $2.93 billion in 2020, expecting it to reach $18.59 billion by 2030, growing at a CAGR of 20.4%. The rapid increase of LEO satellites bodes well for Global Invacom, helped by the June 2019 acquisition of Apexsat, a company which specialises in steerable earth station solutions and motorised & transportable antenna systems.
EV/EBITDA and net asset based valuations suggest significant upside
We base our valuation on the average EV/EBITDA multiple of the company’s profit-making, London-listed Telecoms Equipment sector peers. Conservatively discounting the multiple by 30%, we derive a fair value target price of 17.25p per share, suggesting 165% upside from current levels. Providing significant backing to the valuation are tangible net assets totaling 9.03p per share as at 30th June 2021, 39% higher than the current share price. We initiate coverage of Global Invacom with a target price of 17.25p and stance of Conviction Buy.
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| Year to Dec | 2021E | 2022E | 2023E | 2024E |
|---|---|---|---|---|
| Revenue ($m) | 90.7 | 97.1 | 115.5 | 120.9 |
| EBITDA ($m) | 3.9 | 5.2 | 4.8 | 6.9 |
| EPS (p) | (0.44) | (0.03) | (0.11) | 0.47 |