Monday, 5 September 2016

Innovalues Limited - Earnings Review, Future Prospects & Possible Transaction

Innovalues Limited

Earnings Review and Future Prospects 

 As reported in the latest earnings announcement, Innovalues marks strong earnings recovery as net profit rises to S$6.2 million for 2Q16.

  • Gaining traction from the previous quarter, growth in the Automotive and Office Automation business segments led to an overall revenue growth of 10.6% qoq to S$30.1 million
  • Core business segments continue to generate strong positive operating cash flows resulting in a net cash position of S$28.0 million
  • Building on the momentum from the first half of the year, the Board of Directors is cautiously optimistic on a stronger second half for 2016.

Despite challenging economic conditions, the Group reported revenue growth of 2.1% year-on-year (“yoy”) to S$30.1 million for 2Q16. Comparing on a quarter-on-quarter (“qoq”) basis, the Group recorded a 10.6% rise in revenue as it continues to drive momentum for a strong showing in the second half of the year. 

 On a segmental basis, the Automotive (“AU”) segment continued to be the primary contributor of revenue accounting for 78.8% while the Office Automation (“OA”) segment accounted for 21.1% of the overall revenue for 2Q16. 

 Revenue from the AU segment increased 4.4% yoy to S$23.8 million for 2Q16 driven by an increase in orders from customers in China. 

 Conversely, revenue from the OA segment slipped marginally by 3.3% yoy to S$6.4 million due to a decline in orders from customers in the US. 

 The Group’s commitment to enhancing operational efficiencies led to a 7.7% yoy increase in gross profit to S$9.5 million for 2Q16. 

 Correspondingly, the Group’s gross profit margin expanded from 29.9% for 2Q15 to 31.6% for 2Q16. 

 In terms of profitability, the Group’s net profit is on track for earnings recovery from preceding quarter, posting a 63.9% qoq increase to S$6.2 million for 2Q16. 

 Comparing on a yoy basis with 2Q15, it also improved by 5.7%. 

 The Group’s core business operations continue to generate strong positive operating cash flows of S$11.4 million for 1H16. 

 As a result, cash and cash equivalents amounted to S$30.2 million with a net cash position of S$28.0 million as at 30 June 2016. Going forward, the Group will continue to focus on strengthening cost controls and improving productivity across all business segments. 

 The increasing trend for governments worldwide to adopt stricter regulations towards safety, energy consumption and environmental protection remains and continues to represent an opportunity for the Group’s core AU business. 

 As such, the Group strives to enhance its engineering capabilities and improve upon its competitive advantage in order to take advantage of the available growth catalysts in the industry. 

 While charting steady growth, the Group adopts a prudent approach in relation to business headwinds such as increasing labour costs and volatility in the foreign exchange markets. 

 Barring any unforeseen circumstances, the Board of Directors is cautiously optimistic for a stronger financial performance in the second half of 2016.

Possible Transaction to Enhance and Unlock Shareholder Value

 The Board of Directors (“Board”) of Innovalues Limited (the “Company”) refers to the announcements made by the Company on 3 July 2016, 19 July 2016 and 2 August 2016 (the “Announcements”) where the Company had informed shareholders in the Announcements that the Company was in discussion with various parties in connection with a possible transaction.

The Company wishes to update shareholders that matters have progressed since the Announcements and at this time, the Company is continuing discussions with one of those parties.

Such discussions are still on-going and there is no assurance or certainty that any transaction or agreement will be entered into pursuant to these discussions. 

Key Ratios (Extracted from Poems 2.0 Analytics on 6/9/2016 9.18am)

Basic Stock Information   

For more information, please see Company Website http://www.innovalues.com/

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About Innovalues Limited 
Established in 1997, Innovalues Limited (“Innovalues” or the “Group”) specializes in the manufacturing of customized precision machined parts and components. 
These include automotive components, printer rollers, mechanical devices, and sub-assemblies as well as surface treatment services. 
Headquartered in Singapore, Innovalues has grown extensively through a combination of customer and product diversification and regionalisation. 
At present, the Group has operations in Malaysia, Thailand and China, occupying a total manufacturing space of approximately 50,000 sqm. 
With an aim to be the preferred global partner in precision engineering, the Group is focused on delivering the highest quality of products and services to its global customers.
Source: 
Innovalues Limited Q2 2016 Press Release
Innovalues SGX Announcement on 2/9/2016
Poems 2.0 Analytics (Key Ratios extracted on 6/9/2016 9:18am) 

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