Innovalues: Technical sell call sparks selloff; fundamentals remain intactInnovalues’ share price fell as low as 5.3% intraday after a broker issued a technical sell call with a price objective of 72-73¢.
Fundamentally, Maybank KE believes business growth is on track for the precision parts manufacturer to meet its full year net profit forecast.
To recap, Innovalues is expected to perform better in 2H16 than 1H16 due to improving sales and margins. The house also notes that major customers such as Sensata and VW have performed better than expected, and the group has recently secured a new Japanese customer.
From a situational perspective, the group has recently reaffirmed that the M&A related discussions are still in progress. Given that talks have already been ongoing for six months, it should have passed the due diligence phase and it should now boil down to pricing.
Given the state of the markets and world economies, Maybank KE believes a range of $1-1.20 (8-10x FY16E EV/EBITDA) should be acceptable. Maybank KE’s current TP for Innovalues is $1.15. The stock is a constituent in Market Insight Growth portfolio.
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