SINGAPORE (June 7): Addvalue Technologies has finally started to commercialise its key flagship technology, the inter-satellite data relay system (IDRS), which has been under development and testing for more than three years.
The IDRS will enable the world’s first commercial 24/7 real-time on demand communications services for Low Earth Orbit (LEO) satellites.
Earlier this morning, the group announced that it has entered into an airtime service agreement with an existing customer for the latter to provide enhanced data gathering services to its clients.
See: Addvalue Tech signs airtime service agreement with existing customer
This came on the heels of the group securing its first major commercial IDRS contract with a satellite services provider for the design and supply of IDRS terminals to be installed on the customer’s multi-LEO satellite constellation in April.
See: Addvalue Tech announces first major commercial IDRS contract win
Also in April, the group entered into an agreement with a US-based aerospace company to carry out feasibility study for the adoption of IDRS in the latter’s space missions.
In an unrated report on Thursday, KGI Securities says based on the company’s estimates, IDRS has the potential to increase Addvalue’s revenues by 10 times over the next three years, adding more than US$40 million ($53.3 million) in recurring revenues, subsequent to the full deployment of the client’s multi-LEO satellite constellation.
This is based on a mix of recurring airtime services and hardware sales, which could generate US$11 million net profit assuming a 28% profit margin.
In addition, the group intends to spin-off AVS, which holds the IDRS business, via a distribution-in-specie of a portion of the AVS shares currently held by the company to Addvalue’s shareholders as a reward.
However, the group has been loss-making for the past three years, mainly due to the amortisation and impairment loss of intangible assets and development costs.
See: Addvalue Tech chalks up 4th straight year of loss; says latest contract signing delayed
“We understand that amortisation is expected to decline to US$0.5 million in FY19 compared to the US$1.8 million average in the past three years,” says KGI.
But things may finally be taking a turn as the group has secured its first major contract for IDRS and currently has ongoing talks with several other satellite service operators.
“If we were to assume that Addvalue could deliver the IDRS on net profit margins of at least 28% (yielding net profit of US$11 million) in the next three years, it would be trading at an attractive 5 times FY21 EPS,” adds KGI.
As at 1.05pm, Addvalue shares are trading at 4.1 cents.
