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.


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