Innovalues

Innovalues: (S$0.895) 2Q16 results in line; better 2H ahead, M&A still a catalyst
-2Q16 net profit of $6.2m (+5.7% y/y, +63.9% q/q) that was in line with expectations.
- Revenue rose 2.1% y/y and 10.6% q/q to $30.1m boosted by increased automotive sales from PRC customers.
- Gross margin expanded 1.6ppt y/y to 31.6%, driven mainly by operational efficiency.
- 2H expected to be better. On the M&A front, the group is still in active discussions with several parties on a potential takeover. The absence of interim dividend suggests talks are at an advanced stage.
-Trading at 11x FY17e P/E, or more than 20% discount below peers. Market Insight includes into Growth portfolio.