Innovalues

Innovalues: CIMB reiterate Add on Innovalues with a TP of $0.93 after visiting its operations in Malaysia recently.

During the trip, the house noted many machines for its automotive operations were customised to improve efficiency. Besides, Innovalues continues to invest in newer technology and the house sees scope for further costsavings,especially in the final inspection phase that is currently still labour-intensive.

Innovalue may also have an edge against competitors as it offers in-house plating and surface finishing services for all printer rollers under the office automation segment, as such services are normally outsourced by its peers.

Further, the group could be a possible M&A target as CIMB noted Privatisation plays in the region is on the rise, namely Interplex Holdings and IPE Group. The group's superior gross margins of 28-30%, strong cash generating ability and earnings growth momentum makes it an even more attractive target.

Therefore, the house remain positive on the long-term outlook of Innovalues in view of the secular growth trend of increasing sensor usage in cars globally. Key risk in the near-term is order delay or cancellation from customers.