Jeremy Peh contributed this article to NextInsight
ADDVALUE TECH - Has it reached an Inflection Point for Strong Re-Rating?
I decided to write this article after seeing how AEM has been performing so well even during the COVID-19 pandemic period.
AEM stock struggled over many years at around $0.04 to $0.08 before soaring to $2.60, a whopping 30 to 60 times gain over the last 3 to 5 years.
While it was pouring resources into innovations, the cash flow situation for Addvalue has been tight since 2017.
However, the recent successful issue of new shares (at 2.25 cents a share) that raised about $5.7m in net proceeds from Rain Asia Pacific has solved this big issue and will support Addvalue to expand its business significantly.
Use of Net Proceeds
Capability Development Program for Space
The inflow of cash is happening at the right time when one of Addvalue’s core products, Inter-Satellite Data Relay System (IDRS), could be reaching the stage where clients begin to place huge orders.
For example, Capella Space, a US company that aims to create capabilities for hourly, reliable, and persistent imagery of any place on the globe, plans to deploy 36 IDRS into their satellites over the next 2 to 3 years.
Interestingly, the sale arrangement for IDRS will also include airtime sharing so that Addvalue will start to enjoy recurring revenue.
Rain Asia Pacific is the white knight for Hyflux through a vehicle called Aqua Munda which has committed S$208 million to fund the purchase of debts held by some of Hyflux's creditors as well as other working capital requirements of Hyflux "if so agreed".
“I reckon that Addvalue’s FY20 results ended March 2020 should show a much larger revenue and positive profitability against the average of about $6m annual revenue and loss over the last 2 years. The boost is expected to come from an IP that is licensed to a client in a non-exclusive manner at US$6m.”
Holding a 12.48% stake in Addvalue, Rain Asia Pacific is a privately owned company investing into critical infrastructure (including gas-to-power and water industrial sectors), technology and real estate.
The legal and beneficial owners and shareholders of Rain Asia Pacific are two private investors -- Dr. Ali Nasser S.A. Aldhaheri and Mr. Bambang Sugeng bin Kajairi.
Rain Asia Pacific has deep pockets and seems to have invested at the right time to aid Addvalue in growing further.
The key question now is whether the company’s revenue and profit could significantly improve over the next few years. I think the chances are high because of two core products that are shaping up for full commercialization.
|• The IDRS technology seems to have reached maturity. The fact that Capella Space is ready to deploy IDRS over 36 satellites is a huge endorsement.
The IDRS has been described as the world's first on-demand real time connection for low-earth orbit (LEO) satellites.
As Addvalue has a strong partnership with Inmarsat, plus a suite of patents in IDRS, it would be highly difficult for any competitor which tries to step into this space to compete.
• The SDR (Software Defined Radio) Technology may also be reaching maturity following many years of pilot projects for various clients.
It’s noted that in 2019, Addvalue received an aggregate of $2.2m order for this technology.
There are a few other systems that Addvalue Tech has developed over the years and you can view them at https://www.addvaluetech.com/. I plan to speak with the management team during the next AGM and learn more about the technologies.
Disclaimer: This article is for educational purpose and is not intended as investment advice. Please do your own due diligence.