KUALA LUMPUR (Dec 26): Inter-Pacific Research Sdn Bhd has recommended investors to subscribe for the initial public offering (IPO) of Binasat Communications Bhd, for its earnings growth potential and attractive dividend returns, as it is going to be listed on the ACE Market of Bursa Malaysia on Jan 8, 2018.

Inter-Pacific Research analyst David Lai Yoon Hui set his target price for Binasat at 55 sen, representing an upside potential of 26% from the IPO price of 46 sen.

Lai expected Binasat's earnings to grow for its potential revenue growth catalysts from new additions to its services, margin expansion from efficiency gains via cost management efforts, and a sustainable recurring income.

"We believe the stock has potential to generate strong dividend returns. The company does not have a dividend policy but it had distributed 55% of its FY16 earnings and paid a first interim dividend of RM2 million on May 2017 which represents 20% of FY17 earnings. Assuming this is maintained, this will translate into a dividend yield of 4.3% at the IPO offer price," he added.

Lai listed Binasat's risks as dependence on two major customers (Maxis Bhd and Huawei) as well as competition from other telecommunications network support players.

The telecommunication support service company was previously reported to plan to raise RM39.55 million from the IPO.

Binasat said its planned expansion includes setting up a teleport in the Klang Valley and overseas expansion in Laos, Myanmar and Vietnam.