Edison Investment Research Limited
London, UK, 3 November 2020
Forward Industries (FORD): One-stop shop for outsourced services
Forward Industries has augmented its outsourced manufacturing service offer to include hardware and software design capabilities and the ability to secure listings in major US retail chains. This enhanced offer provides a route for offsetting the declining revenues in the legacy business, which provides carry cases for diabetes equipment, as well as enhancing profit. Our indicative valuation is $1.73/share, which is 16% higher than the current share price.
Our indicative valuation is based on a DCF analysis from FY20 to FY23, with a 9.7% WACC and 1.5% terminal value. Noting the findings of our sensitivity analysis, we believe the key catalysts for raising the share price towards our indicative valuation should be confirmation that management is able to maintain design gross margins at the levels achieved so far in FY20 and evidence that the initiative to distribute smart products is being successful.
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