ADDVALUE TECHNOLOGIES LTD (SGX:A31)
Addvalue Technologies - IDRS Enters Revenue Stage
IDRS revenue to grow from US$170k in FY19 to > US$1m in FY20.
- Addvalue Technologies (SGX:A31) announced on 3 October that it has delivered its first IDRS terminal for installation on a satellite scheduled for commercial service launch. The Company had previously delivered an engineering version of the IDRS terminal to Capella Space for pre-launch satellite bus integration and verification which led to the > US$1m order (“New Order”) for more terminals announced on 30 April.
Customer plans to launch up to 36 satellites by 2022.
- The New Order will be substantially fulfilled in FY20 ending 31 March 2020, according to Addvalue Technologies. The timing corroborates with Capella Space’s plan to launch its first operational satellite Sequoia in early 2020, after the launch of demonstration satellite Denali in December 2018.
- Capella Space plans to provide on-demand earth observation data through a constellation of satellites from 2020. These satellites will be in constant contact with Inmarsat’s network using Addvalue’s IDRS technology.
Deployment of terminal paves the way for recurring airtime revenue.
- We previously estimated that each satellite may generate about US$0.6m of airtime revenue per year, based on the assumptions of a rate of US$5 per megabyte and 120 gigabytes of data usage per year. After the launch of Sequoia in a few months, we will have data to recalibrate these assumptions.
- Assuming a gross margin of 20%, the airtime revenue from one satellite will contribute about US$120k per year to the bottom-line; and up to US$4.32m per year for 36 satellites.
Other businesses are also gaining momentum.
- Addvalue Technologies had also announced in July 2019 that an Indonesian customer will be purchasing at least US$1m of proprietary terminal solutions over 12 months. There is also a February 2019 design contract for real-time flight data management in the aviation industry. Finally, there are approximately US$1m of orders for Software Defined Radio (“SDR”) communication modules.
- Addvalue Technologies reported US$1.1m of SDR revenue in FY19 after announcing cumulative orders of S$2.2m up to November 2018.
Maintain Addvalue Technologies Overweight with high risk qualification.
- In all, these orders suggest that Addvalue Technologies will likely deliver steady if not higher revenue for FY2020.
- Given that Addvalue Technologies almost broke even in 1Q FY20, better financial performance can be expected for FY20. However, we are also mindful that the Company’s balance sheet remains weak and that it may be placed on the Watch List if its market capitalisation drops below S$40m for six months.
- See Addvalue Tech Share Price; Addvalue Tech Target Price; Addvalue Tech Analyst Reports; Addvalue Tech Dividend History; Addvalue Tech Announcements; Addvalue Tech Latest News.
- Faced with both high upside and risks, we maintain our Overweight rating on Addvalue Technologies, but caution that risks are also high.
Liu Jinshu
Tayrona Financial Research
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http://www.tayronafinancial.com/
2019-10-16
SGX Stock
Analyst Report
0.041
DOWN
0.052
