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.

Addvalue stock price 

2.4 c

52-wk range

1.6 – 3.6 c

Market cap

S$49 m

PE (ttm)

--

Dividend yield 

--

1-year return

4.4%

Shares outstanding

1.87 b

Source: Yahoo!

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.

I have learnt of another local tech company with a suite of unusual and ground-breaking technologies, Addvalue Technologies, which may be reaching an inflection point like AEM did in Dec 2016.

Addvalue is a satellite communications company that is dedicated to developing connectivity solutions.  


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

%

Net Proceeds 

Capability Development Program for Space

52.6

$3.0 m

Working capital

47.4

$2.7 m

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 t
hat 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".

Positive profit?

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.”

-- Jeremy Peh

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.

Exponential growth

265 colin chanDr Colin Chan, Chairman and CEO of Addvalue TechnologiesWith more IDRS contracts expected to be signed in 2020, barring any unforeseen circumstance, the Group expects its IDRS hardware sales and the associated airtime revenue to grow at an accelerated pace starting from early 2020. Coupled with all the existing IDRS partnerships forged, the Group is cautiously optimistic that these collaborations will help to propel the exponential growth of its IDRS business in 2020 and beyond in a very significant way.”

-- Addvalue announcement
Feb 2020

We can anticipate more satellite players will be approaching Addvalue to do the same.

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.

You may also be interested in:


Comments  

#2 livelifefreely 2020-05-08 20:24
Capella already committed IDRS for at least 7 satellites. The risk here is that funding might also dry up for Capella.

Really important for no mishaps and for these satellites to launch as quickly as possible. Next 3 satellites likely to be launched this month via Electron
+1 #1 dl 2020-05-07 09:38
capella space space launch is postponed. any new orders for idrs will likely be delayed because of difficulty in raising funds for new space players like idrs.

You have no rights to post comments

Counter NameLastChange
AEM Holdings2.760-0.050
Avi-Tech Electronics0.265-
Best World1.8000.010
Broadway Ind0.086-0.001
China Sunsine0.390-
ComfortDelGro1.390-0.010
Delfi Limited1.0500.010
Food Empire1.4200.020
Fortress Minerals0.2700.020
Geo Energy Res0.390-0.005
GSS Energy0.027-0.002
Hong Leong Finance2.560-
Hongkong Land (USD)3.270-0.060
InnoTek0.4350.005
ISDN Holdings0.340-0.005
ISOTeam0.035-
IX Biopharma0.041-0.005
Jiutian Chemical0.025-
KSH Holdings0.2500.005
Leader Env0.050-0.003
Medtecs Intl0.135-0.004
Nordic Group0.345-0.005
Oxley Holdings0.093-
REX International0.121-0.003
Riverstone0.745-
Sinostar PEC0.137-0.002
Southern Alliance Mining0.605-
Straco Corp.0.515-0.010
Sunpower Group0.215-
The Trendlines0.085-
Totm Technologies0.024-0.002
Uni-Asia Group0.840-0.010
Wilmar Intl3.390-0.020
Yangzijiang Shipbldg1.660-0.030
 

We have 1236 guests and no members online

rss_2 NextInsight - Latest News