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 defense organizations, and large corporates. It has three operating segments, namely 1) Fixed Networks, providing broadband and satellite communication networks and turnkey solutions to telcos and governments; 2) Mobility Solutions, offering 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.

Contract for Operating Transport Network in Peru: On September 13, 2021, GILT was granted a USD 12 million service award for recurring revenues from broadband services in Cusco, Peru. Under the agreement, the company will provide operation & maintenance services to the regional broadband transport network for a three-year term.

SSPA Orders Worth USD 17 Million: On September 02, 2021, the company announced that its subsidiary, Wavestream received additional orders worth USD 17 million from an undisclosed satellite operator for delivering Gateway Solid State Power Amplifiers (SSPAs) supporting the gateways of Low Earth Orbit (LEO) constellations. These orders form part of an existing contract.

H1FY21 Results: GILT reported an 18.20% increase in total revenue to USD 101.64 million in H1FY21 (ended June 30, 2021) compared to USD 85.99 million in H1FY20, attributable to the continued recovery from the COVID-19 pandemic, plus the closing of a PRONATEL Regional Project during the current period. Net loss for H1FY21 amounted to USD 5.23 million vs. USD 15.98 million reported in H1FY20. The company existed H1FY21 with a cash balance (including short-term deposits) of USD 60.04 million and no outstanding debt.

Key Risks: Around 26.4% of GILT's outstanding common shares are held by FIMI Opportunity Funds, with two other significant shareholders holding 5.25% and 7.6% stakes as of FY20. Such concentration ownership can limit the other shareholders' ability to influence corporate matters. In addition, contracts with a large US system integrator and PRONATEL accounted for a significant part of the company's total revenue in FY20.

Outlook: In its Q2FY21 release, GILT stated that it expects high revenue and profitability growth in H2FY21, aided by improving momentum and strong backlog. The revenue and profit margins are anticipated to grow further in FY22, with the continued recovery in the inflight connectivity sector, expected growth in the Maritime, Cellular Backhaul, NGSO and Defense market segments, and expanded operations in Peru.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

GILT Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: GILT's share price declined 22.58% in the past six months and is currently leaning towards the lower end 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 32.77. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 10.01. Considering the correction in the stock price, robust dividend yield, recent contract awards, current valuation, and associated risks, we recommend a "Speculative Buy" rating on the stock at the current price of USD 8.40, down 5.72% as of October 04, 2021, at 1:57 PM ET.

* 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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