Paradigm Capital analyst Daniel Kim thinks Com Dev spinoff exactEarth (exactEarth Stock Quote, Chart, News: TSX:XCT) has the makings of a true global leader without the steep price one would expect to may for such an entity.
In a research report to clients today, Kim initiated coverage of exactEarth with a “Buy” rating and a one-year target price of $5.00, implying a return of 82 per cent at the time of publication.
exactEarth, which was founded more than a decade ago as an internal project by parent COM DEV (which was recently acquired by Honeywell) has launched eight satellites and 25 ground stations that service the maritime vessel tracking market with its Satellite-AIS technology.
Kim says the newly-listed company can already be regarded as world leader in its space, but trades at a “steep discount” to its intrinsic value and relative to its peers. The analyst says the company’s partnership with American defense contractor Harris was a “monumental confirmation” of its core detection and de-collision technologies.
In June of last year, Yesterday, COM DEV announced that exactEarth and Harris Corporation had formed a strategic alliance to deliver real-time global tracking coverage for maritime vessels. The company said the ship finder deal would broaden its offerings.
Kim says exactEarth’s unique technology is already translating to high profit margins.
“exactEarth created a new market that was previously unattainable with existing technology,” he says. “Consequently, it has won over hundreds of customers and enjoys rapid growth (43% organic growth in FY15) and profitability (20+% EBITDA margin in FY15), and has since signed a strategic agreement with one of the world’s largest defense contractors, thus securing its leadership position and providing it with a permanent competitive advantage. The company is now poised to disrupt the IoT/M2M market with its lowcost, real-time global tracking solutions.”
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