Gilat Satellite Networks Ltd.

GILT Details

Gilat Satellite Networks Ltd. (NASDAQ: GILT) is a leading provider of satellite-based broadband communications services worldwide. It uses cutting-edge technology to design and produce advanced ground segment equipment and provide comprehensive solutions and end-to-end services. A cloud-based very small aperture terminal (VSAT) network platform, high-speed modems, high-performance on-the-go antennas, high-efficiency, high-power Solid-State Amplifiers (SSPA) and Block Upconverters (BUC) are among the company's offerings.

Latest News:

• Strategic Contract: On March 14, 2022, GILT announced that Intelsat, the world's most trusted satellite communication network operator, is expanding its in-flight connectivity (IFC) capabilities with a significant multimillion-dollar order for its SkyEdge IV Taurus modems.
  

FY21 Results:

• Growth in Topline: GILT reported an increase of 31.91% in revenues to USD 218.82 million in FY21 (ended December 31, 2021) compared to USD 165.89 million in FY20, due to an increase in revenue across all segments.
• Incurred Losses: The company has experienced net losses of USD 2.68 million in FY21 from a profit of USD 34.91 million in FY20, due to a significant increase in operating expenses.
• Strong Balance Sheet: As of December 31, 2021, the company's cash and cash equivalents stood at USD 81.86 million with no outstanding debt.

Key Risks:

• Ownership Concentration Risk: As of FY20, FIMI Opportunity Funds owned about 26.4% of GILT's outstanding common shares, with two other significant shareholders owning 5.25% and 7.6%. As a result of such concentration ownership, other shareholders' ability to influence corporate concerns may be hampered.
• Supplier Concentration Risk: GILT relies on a few suppliers for critical components utilized in its products, such as those necessary to build hub systems and VSATs. As a result, if it cannot obtain these components on favorable terms, its financial health may suffer significantly.

Outlook:

• FY22 Estimates: As of February 15, 2022, GILT anticipates FY22 revenues of between USD 245 – 265 million, representing YoY growth of between 12 and 21%, GAAP operating income of between USD 5 – 9 million, and adjusted EBITDA of between USD 20 – 24 million, representing YoY growth of between 27 and 53%.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks. 

Stock Recommendation:

GILT's share price has fallen 42.98% in the past twelve months and is currently leaning towards the lower band of the 52-week range of USD 6.58 to USD 13.98. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 9.00.

Considering the significant correction in the stock price, steady dividend yield, new contracts, current valuation, and associated risks, we recommend a "Speculative Buy" rating on the stock at the current price of USD 7.76, down 0.13% as of March 15, 2022, 11:10 AM ET. Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Three-Year Technical Price Chart (as of March 15, 2022, at 11:10 AM ET). Source: REFINITIV, Analysis by Kalkine Group

Technical Analysis Summary:

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision should be made depending on the investors' appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the valuation has been achieved and subject to the factors discussed above.