UOB Kay Hian
Date of Report: Friday, 01 August 2025

Plover Bay Technologies Delivers Robust Growth: Regional Momentum, Recurring Revenue Surge, and Strategic Expansion

Overview: Strong Growth Story Continues for Plover Bay Technologies

Plover Bay Technologies (HKEx: 1523), a specialist in R&D and sales of connectivity hardware, software, and related services, continues to impress with its first-half 2025 financial performance. The company’s rapid expansion in EMEA and Asia, robust subscription revenues, and prudent cost management have positioned it as a leader in its sector. UOB Kay Hian maintains a “BUY” recommendation with a target price of HK$7.61, representing a 14.3% upside to the HK$6.66 share price as of the report date.

Company Snapshot: Plover Bay Technologies

• GICS Sector: Information Technology
• Bloomberg Ticker: 1523 HK
• Shares Issued: 1,103 million
• Market Cap: HK\$7,345 million (US\$942 million)
• 3-Month Avg. Daily Turnover: US\$0.6 million
• 52-Week High/Low: HK\$6.80 / HK\$3.55
• Major Shareholder: Wing Hong Chan (68.55%)
• FY25 NAV/Share: US\$0.05
• FY25 Net Debt/Share: -US\$0.04 (net cash position)

Share Price Performance

• 1 Month: +14.8%
• 3 Months: +25.2%
• 6 Months: +39.0%
• 1 Year: +61.0%
• Year-to-Date: +49.8%

1H25 Financial Results: Growth Driven by EMEA and Asia

• Attributable Net Profit: US\$21.7 million (+13.4% YoY), representing 47% of the full-year estimate
• Revenue: US\$62.9 million (+9.9% YoY, +5.8% HoH), 45% of the full-year estimate of US\$141 million
• One-Time Sales: US\$45.2 million (+8.9% YoY)
• Recurring Sales: US\$17.7 million (+12.5% YoY), now 28.1% of total sales
• Gross Profit: US\$35.0 million (+10.1% YoY)
• Operating Profit: US\$24.8 million (+12.8% YoY)
• Net Profit: US\$21.7 million (+13.4% YoY)

Regional Sales Trends and Drivers

• EMEA/Asia: Sales grew rapidly by 39.2% and 44.3% YoY respectively, driven by large multi-year project deliveries.
• North America: Accounts for 55% of revenue, but sales declined 6.4% YoY due to a high base in 1H24 (from the Peplink-Starlink launch) and shipment delays amid shifting trade policies.

Margin Expansion and Operating Leverage

• Gross Margin: Stable at 55.5%, with improvements in Mobile First Connectivity products due to an improved product mix.
• Operating Expense Ratio: Decreased by 0.9ppt YoY to 16.1%, supporting net profit growth.
• Net Margin: 34.4% (+1.1ppt YoY)

Recurring Revenue and Subscription Growth

• Recurring Revenue: Up 12.5% YoY to US\$17.7 million (28.1% of sales, up from 27.5%)
• Software Licences, Warranty & Support Gross Profit: 49.4% of total gross profit (vs 48.0% in 1H24)
• Contract Liabilities: Up 29% YoY to US\$36 million
• Subscription Take-up Rate: Rose to 36.5% (from 34.1%), fueled by an 18% YoY increase in devices under subscription and increased channel partner incentives

Dividend Policy

• Interim Dividend Per Share (DPS): 12.34 HK cents
• Interim Payout Ratio: 80.5%, in line with historical levels

Strategic Partnerships and Brand Expansion

• Starlink Collaboration: Expanded product scope to all Starlink devices, gaining full access to Starlink’s growing user base.
• Iridium Partnership: New partnership with Iridium, a global leader in voice and data satellite communications, opening up opportunities for technical integration and cross-selling.
• Brand Deployments: Peplink routers featured in SIEM Shipping, Eastern Europe’s national railway, and are powering global HYROX fitness events with bonded fibre, Starlink, and 5G links for zero-downtime connectivity.

Trade Uncertainties: Limited Impact and Geographic Diversification

• Production: OEMs in Taiwan, currently exempt from US tariffs.
• US Market: Remains primary market, but significant growth potential identified in EMEA and Asia with regional-specific products.

Earnings Revision and Forecasts

• Revenue Forecasts (2025-2027): Lowered by 2%-4% to US\$138m, US\$160m, and US\$186m respectively, to reflect trade uncertainties.
• Net Profit Forecasts (2025-2027): Lowered by 2%-3% to US\$45m, US\$53m, and US\$63m, reflecting lower revenue estimates but offset by continuing operating leverage.

Valuation and Recommendation

• Target Price: HK\$7.61 based on 10-year DCF (10.1% WACC, 2% terminal growth)
• Implied 2025F/2026F PE: 23.8x / 20.3x respectively
• Current Price Implied 2025F/2026F PE: 20.9x / 17.8x (1 SD above 2018-25 historical mean)
• Dividend Yield (2025-2027): 4.6% / 5.4% / 6.3% (assuming 95% payout)
• Recommendation: Maintain BUY

Full-Year Financial Projections and Key Metrics

Profitability, Growth, and Leverage Metrics

• Gross Margin (2024-2027): 54.9%, 55.1%, 55.2%, 55.3%
• Operating Margin: 37.3%, 38.2%, 38.9%, 39.5%
• Net Margin: 32.6%, 32.8%, 33.2%, 33.7%
• ROE: 71.4%, 79.6%, 87.3%, 91.1%
• Debt to Equity: 19.7%, 27.1%, 29.1%, 28.6%
• Net Debt/(Cash) to Equity: (97.4%), (69.0%), (71.1%), (71.5%)
• Interest Cover: 151.3x, 40.1x, 35.3x, 35.6x

Conclusion: Plover Bay’s Investment Case Remains Strong

Plover Bay Technologies’ first-half 2025 results demonstrate its ability to drive growth in multiple regions, expand its recurring revenue base, and create value through strategic partnerships while maintaining high margins and robust profitability. With a strong balance sheet, high dividend payout, and ongoing innovation in connectivity solutions, the company presents a compelling opportunity for investors seeking growth and yield in the tech hardware space. The current valuation offers attractive upside given its growth profile, global expansion, and dividend prospects.

Broker Profile and Contact

For further details, contact UOB Kay Hian analysts:
Kate Luang: +852 2826 4837, [email protected]
Gigi Cheuk: +852 2236 6794, [email protected]