Date of Report: 24 September 2024
Broker Name: UOB Kay Hian
Company Overview
Plover Bay Technologies (1523 HK) is a small-mid cap company that has shown remarkable growth in 2024, continuing its solid momentum from the previous years. The company specializes in producing wireless connectivity and networking solutions, with a strong presence in markets like the US and Australia.
Growth Momentum in 2024
Plover Bay’s revenue growth accelerated in July and August 2024, further strengthening from the 28% year-on-year (yoy) growth achieved in the first half of 2024 (1H24). The company anticipates a full-year revenue growth of 25% yoy, even against a high base in the second half of 2023 (2H23). This growth has been primarily driven by robust demand in the US and Australia.
Revenue and Profit Forecasts
The broker, UOB Kay Hian, raised its revenue forecast for Plover Bay for 2024-2026 by 1% to reflect this strong momentum. Similarly, net profit forecasts for the same period were revised upwards by 8%-9%, citing stronger-than-expected gross margins. Gross margins are expected to improve further, reaching 56.5% in 2024, up from 54% in 2023. These improvements are attributed to stable raw material costs and a favorable product mix.
Key Developments and Catalysts
A significant contributor to Plover Bay’s growth has been the increased deployment of its Peplink routers in the maritime vertical. In a notable development, Royal Caribbean Group has begun deploying these routers on their cruise ships. Additionally, the company recently debuted Starlink Internet for communities in Alaska, enabling passengers to stay connected both onboard and onshore.
UOB Kay Hian sees further collaboration with Starlink as a potential catalyst for growth in the near future.
Valuation and Investment Opportunity
Despite its rapid growth, Plover Bay’s stock has experienced a 19% share price pullback since late July 2024, making it an attractive opportunity for investors. The stock is currently trading at 11.2x 2025F price-to-earnings (PE), which is below its historical mean of 12.6x. Moreover, the company offers a high dividend yield of 7.8% for 2024 and 8.5% for 2025.
UOB Kay Hian maintains a BUY rating on Plover Bay and has raised the target price to HK$6.10. The broker recommends accumulating shares at the current valuation, given the attractive growth outlook and strong fundamentals.
Financial Projections (2024-2026)
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Revenue:
- 2024F: US$116 million
- 2025F: US$141 million
- 2026F: US$166 million
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Net Profit:
- 2024F: US$38 million
- 2025F: US$46 million
- 2026F: US$55 million
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Gross Margin:
- 2024F: 56.5%
- 2025F: 56.4%
- 2026F: 56.4%
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Dividend Yield:
Conclusion
Plover Bay Technologies has demonstrated strong growth momentum in 2024, driven by increasing demand and innovative technological deployments. With an attractive valuation, a robust dividend yield, and promising future collaborations, the company is positioned well for continued success into 2025 and beyond.
