Paradigm Research technology analyst Daniel Kim, who initiated coverage on Siyata Mobile (TSXV:SIM) on December 6th, 2016 with a target of $0.70 (which implied a return of 150 per cent) posted notes on the company’s record top line quarter in Q4 today.
Kim begins with highlighting the out-phasing of existing 2G networks, which he says is big for Siyata.
“The turning off of this spectrum represents a huge opportunity for Siyata Mobile as this abandoned network is forcing a massive upgrade cycle to 3G and soon to be released 4G devices,” said the analyst.
Kim, listed five reasons he likes the company…
In 2011 Google bought Motorola and promptly exited a profitable $100M market once dominated by Motorola. Siyata hired x-Motorola engineers in Israel and was the first to fill this gap and began selling products to local carriers, so the majority of revenue comes from Israel today.
Introduced in 1992, 2G networks are finally being phased out. Carriers around the world are shutting down this network (which was basically the digital cousin of 1G, on top of voice 2G introduced text messages) and are re-farming this spectrum for 3G/4G. The turning off of this spectrum represents a huge opportunity for Siyata Mobile as this abandoned network is forcing a massive upgrade cycle to 3G and soon to be released 4G devices.
Within the U.S all 3 major carriers will be shutting down their 2G networks:
• Verizon shutting down its 2G CDMA network by Dec 31, 2019
• AT&T shut its 2G network at the end of 2016
• T-Mobile has however done the opposite, to capture 2G M2M connections abandoned by AT&T, with support until 2020
AT&T has migrated 6M 2G customers to its faster networks but still has 6M customers using 2G for M2M, IoT and connected cars.
Within Canada, Rogers is the only carrier offering a 2G network, but only until 2018. The rest of the world is more sporadic.
2. TAM: Opportunity for Siyata
The total addressable market for this 2G to 3G upgrade is a very large (for this small company) 500K units @$300/device represents a $150M TAM. As the following chart demonstrates however, this is replacement cycle is just the beginning. Siyata (sold under Uniden brand) is targeting much larger markets with its latest generation products:
• Commercial Vehicles 3G/4G: 15M units @$400-500/device represents a $5.5-7.5B TAM. A big catalyst for growth comes from its relationship with Kodiak Networks, a leading push-to-talk vendor with deep carrier relationships – AT&T, Verizon, Vodafone, Telefonica, Bell Canada
• Rugged Handsets: 5.6M units @$300/device represents a $1.7B TAM. SIM’s customers asked it to deliver a low cost solution.
• Signal Boosters: 75M homes @$400/system represents a $30B TAM
3. Recent Acquisition
Uniden has aided with its expansion plan with a global brand (Uniden) and extensive channel (with carriers and retailers). Accelerated growth coming from new products (3G/4G fleet mgmt device, rugged handsets and cellular signal boosters, below).
4. Customers (commercial fleets)
Public safety, construction, transportation, military, rail. Channel (mobile operators and retail): Bell, Telus, Amazon, Costco, BestBuy etc.
5. It’s Cheap
Just turned cash flow positive and trading at 4.8x EV/EBITDA (2018) vs peers at 9.4x; alternatively 7x P/E vs peers at 19x, so missed priced by the market.
Since his initial report, shares of Siyata Mobile have risen by more than 30 per cent.
Disclosure: Siyata Mobile is an annual sponsor of Cantech Letter.