Gilat Satellite Networks Ltd.

GILT Details

GILT Launches VSATs: Gilat Satellite Networks Ltd. (NASDAQ: GILT) is one of the leading worldwide providers of satellite-based broadband communications. The market capitalization of the company stood at ~$819.56 million as on 1 March 2021. Recently, the company unveiled its next-generation family of VSATs, Aquarius, helping 5G networks and LEO/MEO collections. The latest VSATs is featured by multi-orbit and ultra-high performance, which offers more than 2 Gigabits per second of concurrent speeds and boost smooth satellite handover.

A look at GILT’s 4QFY20 Key Results: During the quarter, the company reported revenues of $42.6 million as compared to $78.3 million reported in the year-ago period and $37.3 million reported in the prior quarter. In 4QFY20, GAAP operating income came in at $62.7 million, up from $9.2 million reported in 4QFY19. GAAP net income stood at $62.4 million, up from $24.0 million, reported in the year-ago period. Adjusted EBITDA for the quarter came in at $1.1 million, down from $13.1 million reported in the year-ag period. The company gained $70 million in merger cancellation fees from Comtech during the quarter. It also paid a dividend of $20 million to shareholders in 4QFY20 and declared an additional cash dividend of $35 million, which was paid in January 2021.

Key Financial Highlights (Source: Company Reports)

What to Expect: The company remains on track to enter 2021 on a good note, given its technological achievements and closing of various deals. In particular, the company witnessed successes in most of its growth areas, primarily Cellular Backhaul and NGSO. The company also expects a massive increase in demand for its IFC products and solutions, given the recovery in air travel. Despite the COVID-19 led uncertainties, GILT expects its 2021 operating results to be better than that of FY20. 

Key Risks: Rising investments in portfolio expansion and product developments are expected to weigh on the company’s margins. GILT is also facing a coronavirus-induced challenging demand environment, which is estimated to hurt prospects in the near term. Furthermore, competition from peers adds to the woes. 

Stock Recommendation: The company exited the quarter with a cash balance of $88.75 million. Cash flow from operating activities in FY20 stood at $43.16 million. GILT gave a positive return of ~29.2% in the past one month. The stock of GILT is trading slightly above its average 52 weeks’ trading range of $22.69- $4.7. On a technical front, the stock has a support level of ~$13.38 and a resistance level of ~$17.2. On the valuation front, the stock is trading at an EV/Sales multiple of 3.8x as compared to the industry average of 4.8x on TTM (Trailing Twelve Months) basis. Considering the current trading levels, comfortable balance sheet position, decent outlook and the key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the closing price of $14.755, up by 5.62% as on March 1, 2021.

GILT Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Kaixin Auto Holdings

KXIN Details

KXIN Enters into a Vehicles Supply Contract:  Kaixin Auto Holdings (NASDAQ: KXIN) was founded in 2015 by its corporate parent Renren Inc. as an endeavor into China's used car financing market. The company is one of the leading premium used car dealerships in China. Recently, the company stated that it has entered into a five-years Vehicles Supply Contract with Haitaoche Limited and China National Vehicles Imp & Exp Co., Ltd. (“CVC”). Notably, on December 31, 2020, KXIN had entered into a definitive share purchase agreement with the Haitaoche to acquire 100% of the share capital from the shareholders of Haitaoche. As per the terms of the Vehicles Supply Contract, CVC will meet the requirements of Haitaoche and supply consumer vehicles worth RMB2.0 billion for resale through Haitaoche’s networks in 2021. The deal is expected to increase the supply volume by a minimum of 20% annually during a five-year period.  

1HFY20 Key Financial Highlights: During the period, the company reported total net revenues of $33.3 million as compared to $204.6 million reported in the year-ago period. In 1HFY20, the company reported a gross profit of $0.9 million, depicting a decline of 89.3% from $8.6 reported in the year-ago period. Gross profit margin was 2.8% in 1HFY20, down from 4.2% in the 1HFY19. Adjusted net loss during the period came in at $4.6 million, against a net loss of $1.7 million reported in 1HFY19.

Key Financial Highlights (Source: Company Reports)

Outlook: The company has opted to put an end to its used car dealership business operations, given the uncertainty and challenges hovering around its operations. The company expects 2HFY20 revenues to be of a minimal amount.

Stock Recommendation: As at 30 June 2020, the company had cash and cash equivalent of ~$1.04 million. Over the last three months, the stock has corrected by 46.1%. The stock is currently trading lower than the average 52-weeks price level band of $13.04 -$0.40. On the technical analysis front, the stock has a support level of ~$2.78 and a resistance of ~$4.6. Considering the company’s low market capitalisation, decline in revenues and margins, rise in net loss, and uncertainty hovering around its business operations, we give an “Avoid” rating to the stock at the closing price of $3.50, up by 3.86% as on 1 March 2021. We also suggest investors to keep a close eye on the company’s future business updates.

KXIN Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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