Gilat Satellite Networks Ltd.

GILT Details

Gilat Satellite Networks Ltd. (NASDAQ: GILT) is a global provider of ground-based satellite broadband communication services to satellite and telecommunication operators (telcos), government and defence organizations, large corporates and enterprises. The company manufactures and sells cloud-based satellite network platforms, very small aperture terminals (VSATs), high-speed modems, on-the-move antennas, solid-state power amplifiers (SSPAs), block up converters (BUCs), and Transceivers. GILT operates in three segments, namely 1) Fixed Networks, which provides broadband and satellite communication networks and turnkey solutions to telcos and governments worldwide; 2) Mobility Solutions, which provides advanced on-the-move satellite communication systems and solutions to service providers, system aggregators and other commercial businesses; and 3) Terrestrial Infrastructure Projects, offering network infrastructure for fiber and wireless networks of PRONATEL, a Government authority in Peru.

New Orders Abound: On July 15, 2021, GILT announced that it was awarded USD 2 million worth of orders to support Low Earth Orbit (LEO) constellations. The orders were received within the framework of the contract previously announced on June 28, 2021, when it was initially awarded USD 9 million of orders (bringing the total order value to USD 11 million). In addition, the company was awarded a multi-million satellite communication (SATCOM) system contract on July 07, 2021, from a large system integrator in Asia. On June 03, 2021, GILT was also awarded a USD 13 million contract by PRONATEL to deliver internet services to hundreds of sites in Peru over two years.

Q1FY21 Results: GILT reported a 6.20% decrease in total revenues to USD 44.71 million in Q1FY21 (ended March 31, 2021) compared to USD 47.67 million in Q1FY20, primarily due to a decline in revenues from the Mobility Solutions segment. However, the company reported a decline in net losses to USD 5.10 million in Q1FY21 from USD 11.76 million in Q1FY20, mainly due to the reduced cost of revenues during the quarter. As of March 31, 2021, the company’s cash balance stood at USD 48.91 million, with no outstanding debt.

Key Risks: Approximately 26.4% of the company's outstanding common shares were held by FIMI Opportunity Funds, with two other significant shareholders holding 5.25% and 7.6% stakes as of FY20. This concentration of ownership can limit the other shareholders’ ability to influence corporate matters. Furthermore, contracts with a large US system integrator and with PRONATEL accounted for a significant part of the company's revenues in FY20.

Outlook: As of Q1FY21, GILT anticipates decent momentum across all of its business verticals in FY21 except for Inflight Connectivity (IFC) market segment. Approval of the operational phase in the Cusco region of Peru is expected to generate recurring revenues for the company. GILT also stated that it expects positive momentum in the IFC, Cellular Backhaul and Non-Geostationary Orbit (NGSO) markets in FY22, which is expected to result in significant increases in revenues and profitability for the year.

GILT Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: GILT's share price has fallen by 11.18% in the past one month and is currently leaning towards the lower-band of the 52-week range of USD 4.80 to USD 22.69. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is 35.04. Considering the company’s growth prospects, strong profitability margins, balance sheet strength, robust dividend yields, and associated risks, we recommend a “Speculative Buy” rating on the stock at the current price of USD 9.13, down 6.83% as of July 15, 2021, at 02:36 PM ET. The target price of USD 11.01 represents a P/E of 14.88x on LTM EPS of USD 0.74.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

* Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

Taoping Inc.

TAOP Details

Taoping Inc. (NASDAQ: TAOP) is a Chinese provider of blockchain technology and cloud-based platforms for Smart City Internet of Things (IoT), Digital Advertising Delivery, and other internet-based distribution systems. TAOP operates in two segments: 1) Cloud-Based Technology (CBT), which includes cloud-based products for private sector markets such as new media, healthcare, education, and residential community management, and 2) Traditional Information Technology (TIT), offering project-based products and services such as Digital Public Security Technology (DPST) and Multi-screen Digital Display Systems (MDDS) for the public sector. In FY21, TAOP expanded its operations to digital assets and blockchain businesses by purchasing Antiminers, a general-purpose server.

Registered Direct Offering of Common Shares: On July 12, 2021, TAOP stated that it reached an agreement with a group of investors, according to which it will sell 1.2 million common shares to the investors in a direct offering at USD 4.15 per share. Concurrently, TAOP will also issue warrants to purchase an aggregate of 360,000 common shares, exercisable within 36 months at an exercise price of USD 4.56 per share.

East China Expansion Project: TAOP entered into a strategic agreement with Zhenjiang's Economic and Technological Development Zone (ZETDZ) for its East China Growth Initiative on June 11, 2021. The initiative involves building the Taoping G cloud data center, developing and selling digital servers, and launching an operation center to expand its digital business.

FY20 Results: The company reported a 19.78% decline in total revenues to USD 11.06 million in FY20 (ended December 31, 2020) compared to USD 13.79 million in FY19, primarily due to unfavorable macro environment and slowdown of the out-of-home income advertising market in FY20. In addition, the company reported an increase in net losses to USD 17.69 million in FY20 vs USD 3.58 million in FY19. As of December 31, 2020, the company’s cash balance stood at USD 0.88 million, with a total debt of USD 7.39 million.

Key Risks: The Chinese authorities' recent crackdown on its US-listed tech businesses and the consequential possibility of stricter rules could dent the company's operations. This is after the passage of a bill in the US that could lead to the delisting of some Chinese companies from the country’s exchanges (in case the US authorities cannot satisfactorily audit the company for three consecutive years). These constitute significant political and regulatory risks for the firm.

Further, TAOP’s top five customers accounted for 25% and 24% of the total revenues in FY20 and FY19, respectively. This concentration of business within a handful of customers can potentially hurt the company’s financials.

Outlook: For FY21, the company expects its revenues to be in the range of USD 40 million to USD 50 million, with operating income estimated to be around USD 8 million to USD 10 million. This includes contributions from TAOP's New Media, Render Lake and new revenue streams established in FY21.

TAOP Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: TAOP's share price has fallen by 39.87% in the past three months and is currently leaning towards the lower-band of the 52-week range of USD 1.93 to USD 16.86. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is 35.39. Considering the company’s new revenue streams, business expansion plans, balance sheet strength, and associated risks, we recommend a “Speculative Buy” rating on the stock at the current price of USD 3.80, up 2.15% as of July 15, 2021, 3:38 PM ET. The target price of USD 4.52 represents a Price/Sales of 4.62x on estimated FY21E sales per share of USD 0.98.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

* Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

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