KGI Securities has initiated InnoTek at “outperform” with a target price of 73 cents based on the company’s 0.5x EV/EBITDA, a slight discount to its fellow SGX-listed manufacturing service companies.

KGI analyst Kenny Tan believe that the company will enjoy a stable outlook that is supported by demand from China for its automotive business. The company is also expected to see its business recover to its pre-pandemic levels.


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InnoTek’s restructuring efforts that were conducted in 2014/2015 were deemed successful as the current management team now has a five-year record for making profit and generating free cashflow.

“InnoTek possesses a strong balance sheet with the ability to generate free cash flow and maintain current dividend rates,” says Tan.

Apart from the restructuring, InnoTek was also able to manoeuvre around a weak Covid-19 induced 1QFY2020 performance and produced resilient 2QFY2020 results that saw y-o-y growth.


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The company’s diversified customer base, which contributes to its stable outlook, is yet another positive.

On this, Tan expects revenues to rebound in FY2021, although it may stay below the $200 million mark unless the company announces new projects in its pipeline.

“We forecast FY20/21/22F PATMI at -39%/+25%/+2.5% y-o-y, while FY20/21/22F EBITDA is +1.4%/+8.8%/-0.1% y-o-y as right-of-use depreciation and interest expenses climb,” he adds.

Shares in InnoTek closed 2 cents higher or 3.1% up at 67 cents on Jan 13.