Gilat Satellite Networks Ltd

GILT Details

Gilat Satellite Networks Ltd. (NASDAQ: GILT): Gilat Satellite Networks Ltd., together with its subsidiaries, provides satellite-based broadband communication solutions and services in Latin America, the Asia Pacific, North America, Europe, the Middle East, and Africa. It operates through three segments: Fixed Networks, Mobility Solutions, and Terrestrial Infrastructure Projects. The company was founded in 1987 and is headquartered in Petah Tikva, Israel.

Propelling factors inclining towards the GILT:

• Strategic partnership with commercial aviation: On January 24, 2022, the company announced its strategic ties in commercial aviation with Intelsat, operator of one of the largest integrated satellite. This partnership will assist in providing in-flight connectivity, which is designed to deliver fixed and mobility services for maritime and land mobility too.  
• Attained greater Maritime market share: On January 13, 2022, the company attained a greater share of the maritime market in a new deal with a Eurasian satellite service provider to expand maritime connectivity in the region.
• Contract extension: The company announced on January 10, 2022, it got an extension for 12 months on its continuous revenues managed services 4G cellular backhaul project with a leading Mobile Network Operator in Mexico.

Q3FY21 Results:

• Increase in revenues: The company reported an astounding increase in revenues by 34% year–over–year to USD 49.9 million, but on a quarter-over-quarter basis, it’s a bit on a declining side to 12% from the previous quarter.
• Improving Net Income: Further, on the Net income front, the company reported USD 1.5 million as compared to the operating loss of USD 1.9 million in 3QFY20. In 2QFY20 the company still reported a positive Net Income of USD 0.2 million, which was keeping it afloat.

 Key Risks:

• Capex requirement and Increasing interest rates: The Capital expenditure requirement in the telecommunication sector can dent the balance sheet for long many years and can hamper the solvency rations for its investors. The ever-changing technology can be of risk in the advent of anything new and cost-effective arriving, causing the whole cycle to start from square one. The rising interest rates talks and be of concern if the company would want to take debt in coming months down the line, which could dampen the profitability of its financials.

Valuation Methodology: EV/Sale Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM 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 stock price experienced a serious meltdown from the highs of USD 22’s in 2021, and since then the stock corrected and hovered the lows arrows around USD 6.58 in November 2021, and post that showed some sign of stability. Currently, the stock is trying to peep above the 50 DMA and this can trigger further upside, and the strength can be witnessed once the 200 DMA crosses the 50 DMA from below. Another key factor that makes the stock worth keeping in the kitty is its improving financials and expansionary plans and strategic ties.    

We have valued the stock using the Enterprise Value/Sale per share based on relative valuation methodology and arrived at a target price of USD 8,73. The current price of USD 7.5, is making the trade lucrative compared to its undervaluationConsidering the improving financials, strategies ties, and expansionary goals and its probable positive impact in coming quarters. Hence, we recommend a "Speculative Buy" rating on the stock at the price of USD 7.50, down by 0.92% as of February 01, 2022, at 02:18 PM ET.

1-Year Technical Price Chart (as on February 01, 2022, at 02:18 PM ET). Source: REFINITIV, Analysis by Kalkine Group

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.