Stratech (S$0.40): 1HFY16 landed in red; revenue to recover in 2HFY16
Stratech swung to a 1HFY16 net loss of $3.8m from a near breakeven $0.1m profit in previous year as revenue plunged 77.2% t/t to $2.1m.
Top line crumbled due to lower revenue recognition as ongoing projects have yet to achieve key milestones. Notable projects in progress include installation/upgrade of iFerret intelligent airfield/runway surveillance and foreign object & debris (FOD) detection system at Dubai Int'l Airport, Hong Kong Int'l Airport and Singapore Changi Airport.
This, coupled with its fixed overheads, dragged the bottom line into the red.
Looking ahead, management is sanguine on the group’s outlook as they expect contracts of iFerret installation at Miami Int’l Airport and iFerret upgrade at Changi Airport second runway to contribute to 2HFY16 results and beyond.
In addition, the group noted that 217 out of 7,400 IATA-registered airports are moving toward adoption of FOD detection systems and is targeting to bag contracts from 37 of these airports over the next three to five years.
Valuations are meaningless for the counter at this point in time given the lack of profitability and infancy stage of the industry cycle.
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