mm2宣布制作三部本地片为导演创造海外曝光机会

联合早报报道

冠病疫情造成百业待兴，本地mm2娱乐为了刺激受到重创的电影业，昨天下午宣布将在今年内制作三部本地电影，目的也是让有潜能的本地导演展才华。

据所知，mm2娱乐也将把三部电影推向海外市场。mm2执行董事黄世勇透露：“我们希望为本地导演创造海外的曝光机会。这些导演需要与区域成熟的业者、大市场合作的体验，以便赢得声誉，并在不同市场获得未来拍片项目的机会。此外，也有助于打造新加坡品牌。”

三名导演是黄俊伟、邝子君和任锦添，分别执导“Sunday”（暂译《浪漫星期天》）、《芽笼》（Geylang）和“A Good Goodbye”（暂译《美好的再见》）。

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What happened in markets this week, and what are analysts talking about?

Kimly Group

•CIMB; Initiate with BUY and TP S$0.46 The house believes Kimly will maintain its status as the top coffee shop operator in Singapore, with earnings expected to grow at a CAGR of 47% in FY19/20-22F. Kimly has 72 coffee shops in Singapore at end Sep 20, and is trading at 14x FY22 PE, below its initial 25x PE at IPO in Mar 17. The House likes Kimly for its resilient business model, strong cashflow and net cash balance sheet.

Keppel Corp & Sembcorp Marine

After months of market speculation, Keppel Corp and Sembcorp Marine have announced that they have agreed to explore a potential tie-up that will see the combination of their struggling offshore and marine business (O&M) as the industry continues its downturn. The deal will see Keppel Corp spinoff its O&M business into a listed entity with Temasek becoming the largest shareholder in the combined company. Separately, Sembcorp Marine also announced a S$1.5b fully committed rights issue with Temasek committing to subscribe up to 67% of the rights issue and DBS underwriting the reminder.

Keppel Corp 1 year share price

Sembcorp Marine 1 year share price

• CIMB; KEP exit to create a mega yard for SMM. Near term more positive for Keppel vs Sembmarine as Keppel is finally exiting the O&M via the spinoff and divestment of stranded rigs/receivables of S$3.9b.

• UOBKH; Keppel Corp Maintain BUY and TP S$6.37. The House view developments as largely positive as Keppel moves towards vision 2030 of generating a double-digit ROE and more recurring income. Keppel will get S$500m cash from Sembcorp Marine and an undisclosed number of shares in the combined entity. Keppel will distribute all its shares in the combined entity to shareholders while the S$500m may be distributed as a special dividend.

Venture Corp

• Macquarie, Downgrade to Underperform with TPS$13.20. COVID-19 has resulted in loss of wallet share of IQOS for Venture which accounts for >20% of revenue in 2017. The COVID-19 situation in Malaysia has resulted in VMS losing wallet share for IQOS and the House believes the business could be at a key turning point where customer Philip Morris may re-consider its contracting arrangement. Ex-IQOS, Venture has not been able to significantly grow earnings from other product arenas. The House cuts its FY21-23F earnings by 9-29%, TP of S$13.2 based on P/B.

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We have heard a lot about the US Federal Reserve System (Fed) or US’s central bank (equivalent to our Singapore’s MAS), and how it affects the market with their monetary policy.

One of the major components of the Fed’s quantitative easing program so far has been its huge bond purchase program which has resulted in a surge in its balance sheet to US$8 Trillion.

The quantitative easing program by the US Fed has been a major contributor to the stellar performance of the stock market over the last few years but has also led to increased turbulence and worries among market participants recently with the rise in inflation.

What does this all mean? and how does it affect the economy?

What is the Fed’s Balance Sheet?

Like a company, the Fed’s balance sheet simply contains the number of assets and liabilities that the Fed holds. One of the major components of the Fed’s liabilities is the amount of currency in circulation.

Ballooning assets- The Fed’s assets contain mainly the government securities and mortgaged-backed securities that it purchased/hold. Since the start of the COVID-19 pandemic, the Fed has unleashed an unprecedented amount of stimulus to support the economy. This includes the purchasing of $80b/month in Treasury bonds and $40b in mortgage-backed securities since June 2020.

When the Fed buys these bonds, it increases the money supply in the market by swapping the bonds in exchange for cash to the public, increasing the amount of money circulation in the market. Theoretically, there is no upper limit to how much the Fed can expand its balance sheet.

Dollars in circulation over the last 10 years.

How does the bond purchase program by the Fed help the economy?

Lower interest rate for debts. By purchasing the bonds and mortgage-backed securities, the Fed increases the price of bonds and pushes down the yields on these assets. The interest rates of several debt instruments including mortgages are typically benchmarked to the yield of government debts, hence when the yield on these instruments drops as well.
Lower interest rates encourage consumption and stimulate the economy. Lower interest rates result in cheaper financing and encourage more borrowing and consumption, which hopefully will drive demand for goods and services and stimulate production and employment.
Liquidity in the financial system prevents credit crunch. With more amount of money in the financial system, it helps prevent a credit crunch where there is a lack of funds available or banks increasing the criteria for borrowing, preventing companies from having access to capital. (Which was a real concern at the start of the crisis, as businesses and banks were worried to spend or lend, due to the huge uncertainty and fear of financial loss brought about by COVID-19)

Too much of anything is bad

While the Fed’s stimulus program has helped to stabilize financial markets, there are now increasing concerns of a surge in inflation. (Too much money in the system causes inflation; i.e. if there is too much money, and the number of goods produced remains the same => inflation)

Inflation is an increase in the prices of goods and services.

Some inflation is good for the economy as it helps boost consumer demand and consumption, (it is a sign of a healthy economy, as demand for products/services increases, pushing up prices) and drives economic growth.

However, too much inflation may be bad if it results in

Overspending in the near term==>overheated economy and subsequently a recession. Consumers may worry about price increases and shift a lot of their consumption to the near term, and stop spending in the subsequent years.
Lower competitiveness for companies products resulting in lower exports and GDP growth

As the US economy recovers from the pandemic, inflation has surged

So far, the Fed has believed and assured markets that the price increase is temporary, and is a result of the US economy’s reopening and recovery- as the pandemic has left consumers with excess savings that they want to spend.

Jump in US personal savings rate since COVID-19

Whether inflation is here to stay remains to be seen, but with the Fed’s latest signal of tapering as early as 2023, clearly, some of its confidence has been shaken as perceived by some market participants, as stock markets take a beating over the last week.

Do let us know what you think in the comments section below

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What happened in markets this week, and what are analysts talking about?

Marco Polo Marine

•RHB; Initiate with BUY and TP S$0.041 The house believes that Marco Polo Marine’s diversification into servicing the renewable energy sector will bear fruit in the next 1-2 years. In the meantime, the oil & gas sector remains a major source of income with earnings expected to rebound in the next 2-3 years. Stock price is also currently trading below its greatly impaired NAV and white knights’ and creditor’s entry price of S$0.032-0.033.

SPH

• CIMB; Maintain Add and raise TP to S$2.19. The House deemed SPH as an integrated real estate owner with a quality portfolio worth at least S$6.7b with S$1.2b non-core assets for recycling, and is trading at an attractive P/B of 0.8x vs peers 2.5x

Regional Aviation

•DBS: The house sees a 15-20% permanent decline in corporate travel requirements in the future, with airlines and airport hubs that built their business around corporate travel to be the laggards coming out of COVID-19. Less positive on Cathay Pacific and Beijing Capital Airport

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As featured in Business Times.

RHB has initiated coverage on Marco Polo Marine with a “buy” call and a target price of 4.1 Singapore cents, on an expected turnaround on renewable energy.

In a Wednesday report, RHB analyst Jarick Seet said that Marco Polo’s diversification into servicing the renewable energy sector is expected to bear fruit in the next one or two years, with the oil and gas sector still the group’s major source of income in the meantime.

“We expect to see an earnings rebound, and the group to record a turnaround back to strong profitability in the next two to three years,” he said.

Renewable energy will be a significant growth area for Marco Polo, especially with the influx of investors entering the space. The group has previously secured shipbuilding contracts from Singapore Aquaculture Technologies (SAT) to construct two smart fish farms, which are set to complete by end-FY2021, he said.

He also noted that, as at H1 2021, 20 per cent of Marco Polo’s utilised vessels are already working on wind farm projects in Taiwan, where it has an edge – its vessels are built outside of China, a key requirement, less than 12 years old, a rarity for non-Chinese ships in the region, and more than well-equipped, thanks to stringent requirements for offshore oil and gas activities.

Ho BEE

•DBS; Initiate with BUY and TP S$3.80: More than 90% of revenue generated from rental income which has been time and “COVID tested” with minimal earnings disruption- the House believes Ho Bee’s earnings profile is similar to a REIT, enabling HoBee to pay out dividends of 10 S cents p.a. over last 4 years, translating to a yield c. 4%. Hobee trades at 0.5x P/B. With recent buybacks bringing free float down to 25%, possible scenarios cited by the House includes privatization, securitization of income production portfolio or conversion in to stapled security

Q&M Dental Group

• KGI; Maintain Outperform and raise TP to S$0.91. Q&M has remained resilient with its dental and medical services through COVID-19. Q&M has the largest network of private dental outlets in Singapore with over 90 clinics islandwide and 1 COVID-19 testing lab. Its overseas presence includes 36 clinics in Malaysia and 1 clinic in China.

Global Invacom

•GEM COMM: A local proxy to the increased spending in satellites given Global Invacom’s leading status as a supplier for satellite communication ground equipment solution providers, supplying to MNC customers such as Hughes Network Systems, ST Electronics, Gilat etc. The Group has a strong net cash position of S$0.036 (vs share price of S$0.112), free cash yield of about 20+% with a positive earnings outlook with potential for margin expansion after outsourcing of its manufacturing in China to Phillippines.

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As featured in Business Times.

ENVIRO-HUB Holdings said on Monday night that its associate company Pastel Gloves on May 13 received the 510(k) regulatory clearance from the US Food and Drug Administration (FDA) for its nitrile medical-grade examination gloves.

The group had previously announced a proposed acquisition of the remaining 75 per cent of shares of Pastel Gloves, which will become its wholly-owned subsidiary.

Enviro-Hub will be able to export the medical-grade gloves for sale in the US, where they typically command an average selling price 10 per cent to 15 per cent higher than normal gloves due to the limited supply in the market.

It estimates that only 20 per cent of the gloves in the market have obtained the 510(k) FDA certification and expects demand to remain high.

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DISCLAIMER: THIS IS NOT A RECOMMENDATION. PLS CONSULT YOUR OWN FINANCIAL ADVISER AND/OR DO YOUR OWN DUE DILIGENCE.

What is interesting in 1 minute?

Net cash of S$0.036/share forms 35% of the market cap;
Free cash flow yield of 18-27% per annum over last 2 years (so 2 more years to a totally “free” company backed by net cash?);
A positive earnings outlook with likely margin expansion for FY2021?
Local Proxy to the increased spending in satellites-‘Space Race’ on the back of rising demand for increased connectivity esp in areas where it’s not easily accessible and with the rise of remote working.

Our View: Global Invacom offers both a value as well as a growth angle for investors.

From a value perspective, the Group is trading at just 0.5x P/B (or 0.65x P/Tangible Book if you want to be conservative). Of which, net cash forms about S$0.036/share or 35% of the current market cap which will help to support its valuation. Its free cash flow yield is also very strong, having generated US$3.9-5.8m/year over the last 2 years, translating to a FCF yield of 18.4%-27.5%. This, in our opinion, is also very sustainable, as the Group’s depreciation and amortization already form US$5.7-6.6m/year translating to about 30% market cap each year. The Group’s CAPEX has ranged from US$1.5-US$3.3m/year (excluding any M&A), and we believe it will maintain at that level or even lower, following the Group’s strategy shift in Asia towards an asset-light model, outsourcing its manufacturing in Asia to a third party vendor.
On the earnings front, as one of the leading suppliers for the satellite communication industry, Global Invacom is riding on the increasing investment in satellites driven by the demand for increased connectivity and space race among major companies such as Alphabet, Elon Musk, and Amazon. Looking into FY21, we believe, there is a reason for optimism, as the Group’s major market (~70% of revenue) is in the US, where the COVID-19 pandemic is gradually coming under control due to the mass vaccination program. In addition, of note, the annualized cost savings from the manufacturing outsourcing to third party vendor will also kick in, following its completion in June 2020. From the 2HFY2020 results, the cost savings may be massive, as, despite a 20% drop in revenue, gross profit was up 48% YoY (Gross profit was even US$1m more than 1HFY2020 despite lower revenue), although part of it was attributable to better product mix.

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Global Invacom

Listed in the UK (AIM) and SG (SGX)
Price: S$0.102
Market Cap: S$27.7m

What is interesting?

Attractive valuation: At S$0.102, Global Invacom is trading at 0.45x P/B (NAV:S$0.228). If we were to be more conservative, let’s strip out Goodwill, intangible assets and right-of-use assets, and the stock will be trading at 0.65x P/Tangible book, still not too bad. (Tangible NAV: S$0.156)
35% of market cap backed by net cash (US$7.4m or S$9.8m) Of the assets, Net cash is S$0.036/share (35% of market cap, and 22.9% of tangible net asset value).

Super strong free cashflow generation (18-27% FCF yield over last 2 years)– over the last 2 years, the Group has generated FCF of US$3.8-5.8m. With already 1/3 of its current market cap already backed by cash, technically we need only 2 years before the entire market cap can be backed by cash, assuming no M&A during this period.

- Most importantly, while it’s not showing in profits, its Depreciation and amortization alone is already 27-30% FCF yield. If we just use CF from depreciation and amortization alone less CAPEX, the FCF yield is 6-17% over the last 4 years (assuming they make 0 profit, and no loss.
- Its CAPEX has hovered around US$1.5-2m/year over the last 4 years except for FY2019 where CAPEX is US$3.3m, which we assume may be due to the Group prepping to relocate its factory from Shanghai to the Philippines.

*The right of use assets pertains to depreciation of office premises & warehouses, machinery, motor vehicles etc (about US$2+m/year)

- In 2019, the Group announced a shift in strategy towards a more asset-light approach towards manufacturing in Asia, which will see nearly half of its manufacturing is outsourced to a third-party provider in the Philippines. We believe this may likely suggest CAPEX maintaining at current or even lower levels, which may support the Group’s strong free cash flow generation and profitability in the years ahead.
Proxy to increased connectivity and the ‘space race’. Thanks to its various acquisitions over the years and continued commitment to R&D, Global Invacom is a leading provider for SatCom products and the only full-service outdoor unit developer, manufacturer, and supplier of satellite antenna products for Ku- and Ka-band frequencies in the world. As the demand for data and connectivity grows, Global Invacom is optimistic that its products will play an important role in meeting this demand as service providers adopt satellite solutions. The Group believes the new ‘space race’ by major companies such as Alphabet, Tesla’s Elon Musk, and Amazon’s Jeff Bezos, to launch Low Earth Orbit (“LEO”) satellites to transform internet connectivity worldwide, will benefit the DOS sector and consequently Global Invacom- which is one of the leading suppliers for components to the sector.
- According to Morgan Stanley, satellite broadband is the future of the US$1T space economy as “Satellite broadband constellations will slash the cost of data just as demand explodes from new IoT and cloud-related tech”. The race to build satellite constellations that deliver low-cost, high-speed internet is fuelling astronomic growth in the global space economy, which is projected to be worth US$1T by 2040, and Satellite internet will account for 50-70% of the market’s growth.
- LEO satellites orbiting closer to Earth are less expensive and allow a minimal delay between data leaving the satellite and reaching users of smartphones and GPS communications.
- Medium Earth Orbit (“MEO”) satellites are becoming increasingly attractive for many applications as they provide lower latency and higher bandwidth access than geo-stationary satellites (“GEO”) and have greater longevity than LEO satellites. The acceleration in satellite activity worldwide has triggered more demand for DOS products.
  - Musk’s SpaceX launched the first 60 Starlink satellites in 2019 and expects to build a ‘mega-constellation’ of up to 12,000 satellites by 2027.
  - Amazon intends to deploy over 3,000 internet satellites as part of Project Kuiper.
  - UK’s Oneweb plans to launch 648 constellation by end of 2022.

- Global Invacom’s Data Over Satellite (DOS) segment has helped to support the revenue of the Group, offsetting the decline in its Direct-to-home satellite (DTH) segment, which serves mainly the satellite TV customers. Revenue from DOS has likely overtaken DTH as the largest revenue contributor of the Group (more than 50%) in FY20 and will be the Group’s main focus going forward.

Likely strong earnings rebound in FY2021.

There are a few reasons for optimism for FY2021 results.

Recovery in US. Global Invacom derives nearly 70% of its revenue from the US. While the Group was identified as an essential supplier, the pandemic has affected some of its end customers’ planned rollout of communication services and networks. This, together with component shortages, disrupted design resources and the lack of consistent availability of logistics has resulted in reduced shipments to its customers. With the US pandemic gradually coming under control with the mass vaccination program, hopefully, we can see a recovery in demand for Global Invacom.

- If you refer to the table below, 2H tends to be a seasonally weaker half for Global Invacom. The extent of the drop in revenue in 2HFY2020 is less than 1HFY2020 at the depths of the crisis. The Group also mentioned that it recorded 3 out of 4 quarters of profitability, suggesting improving fundamentals from 2HFY2020 and that the worst could be over for them.

Cost savings from the relocation of manufacturing facilities from China to the Philippines. Following a major strategic review, the Group had relocated its manufacturing operations from Shanghai, China to a third-party vendor in the Philippines for the manufacturing and assembly operations. According to its AR2020, “This transition was completed in the first half of 2020 and is expected to deliver meaningful annualized savings in 2021 and beyond while reducing the Group’s exposure to trade disputes between the US and China.”.

- Given that the transition was completed in June 2020, technically we should be able to see the impact of the cost savings in 2H. Unfortunately, Global Invacom’s results were affected by the COVID-19 which saw 2H2020 revenue dropped 19% YoY to US$50.3m, as the pandemic has impacted the ability of the Group’s end customers to rollout the communications services and networks that were originally planned for 2020.
- The full impact of the efficiency was also affected with the efficiency of its production facilities also negatively impacted as they adapted to social distancing and other international COVID-19 best practices.
- Nonetheless, it is worth noting that despite the drop in revenue, 2H2020 Gross profit increased due to an increase in gross profit margin to a record high over the last few years of 26.5%. The Group attributed it to “a more profitable product mix, manufacturing efficiencies and cost reduction programs”. The increase in gross profit in 2H was US$4.4m (a 48.6% yoy increase! It is even 1m higher than 1H2021 despite 2m lower in revenue in 2H)

The move to the Philippines is also part of the Group’s strategy to move towards an asset-light production & assembly. With the shift, nearly 50% of the Group’s production will be via the third-party manufacturer in the Philippines. Hence, does that also mean lower CAPEX in the future and more cashflow generation?
- Following the relocation, the number of employees has also fallen by more than 40% to 377 at end of FY2020.
- Global Invacom’s manufacturing footprint in 2018-2020

More about Global Invacom- pls visit their website

Global Invacom Group Limited (“Global Invacom” or the “Group”) is one of the world’s leading satellite communication ground equipment solution providers. It has 73 patents (further 27 pending and 9 applied for).

Customers:

Some of the world’s largest suppliers of Direct to Home (“DTH”) television services (eg. Sky in UK, Shaw in Canda, Astro in Malaysia, Dish Network in US) and
Data Over Satellite (“DOS”) services (eg. Hughes Network Systems, Viasat, Gilat and ST Electronics/iDirect)

Services:

Creates and provides a full range of dish antennas, low noise block receivers, transmitters, fibre distribution equipment, switches, and video distribution components within the satellite communications ground equipment market, as well as related products for the healthcare and defence sectors.

The Group was identified as an essential supplier for its supply of equipment to the communications, healthcare, and defence markets.

The Group’s satellite products are classified into 2 segments:

Direct-to-Home Satellite (“DTH”)

Main products include LNBs (universal and customer specific), digital channel stacking switch (“DCSS”) LNBs (both universal and specific), Ku dish antennas, and mounting systems, fibre links and distribution systems. The largest revenue is generated by customer-specific DCSS LNBs.

Data Over Satellite (“DOS”)

The Group offers total DOS reception and transmission system or terminal solution. Beyond the ability to offer reception-only LNBs and antennas for DTH, the Group is now able to extend this same unique capability to the DOS market, helping to maintain its leading position in this sector, especially in emerging markets. Global Invacom is currently developing new DOS products in line with the requirements of our customers, both existing and new, for launch over the forthcoming years.

Customers include service providers, satellite owners as well as aggregators or company-specific specialists.

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