SINGAPORE (Mar 20): SAC Advisors is maintaining its "buy" call on Advancer Global with a target price of 36 cents, as it forecasts strong earnings growth based on its defensive business model and solid M&A track record.
Advancer Global's recent acquisition of a 20.1% stake in waste manager Chiang Kiong, which expands its range of service offerings, is expected to be earnings accretive this year.
Meanwhile, Advancer Global has net cash of more than $8 million and is forecast to deliver 3.8% and 5.1% dividend yields for FY18 and FY19 respectively.
To recap, Advancer Global's FY17 revenue and gross margin came ahead of SAC's estimates. FY17 revenue rose 28.2% to $65.2 million, fuelled by higher placements of foreign maids to households, increase income from security and cleaning contracts, and contributions from the new acquisitions in 2H16 and 2H17.
Gross margin inproved to 28.9% on the acquisition of higher-margins facility management and high-end security services.
"We upgraded our revenue projections by 7.5% and 7.7% for FY18 and FY19 respectively, as we expects cross-selling of services to its expanded customer base and further integration of the group's operations to show results from FY18," says analyst Terence Chua in a Tuesday report.
Although FY17 pretax profit was flat due to higher adminstrative expenses from integration costs for new acquistions and investment to build a smart service platform, Chua expects these efforts to drive earnings growth forward by 25.8%, 36.5% and 29% in FY18, FY19 and FY20 respectively.
As at 11.39am, shares in Advancer Global are trading at 27 cents or nearly 13 times FY18 earnings.
