C-COM Satellite Systems (CVE:CMI) is seeing some solid recognition from investors for its consistent progress so far this year, with shareholders pushing the stock up to nearly triple its levels from the beginning of 2013.
“Perhaps investors are recognizing that the company is one of those hidden gems – with a large cash balance and a solid technology with customers around the world, added to the fact that we pay dividends,” says CEO Leslie Klein.
“We have not changed the way we do business; we’ve been profitable now for almost nine years.”
Indeed, for those looking for a value stock, this seems to be a company that is worth a second look.
The company, which provides mobile auto-deploying satellite antenna systems, has managed to remain ahead of its competitors with its quick delivery tactics, allowing it to ship out its vehicle-mounted antennas at the drop of a hat for emergency situations, like the tsunami in Japan in 2011.
C-COM has over $3 million worth of inventory due to the demand for immediate delivery, which has helped the company “tremendously” in the past, says the chief executive, despite the spikes it generates in sales cycles as “there can’t be a tsunami every year”.
During the Japanese tsunami in 2011, which knocked out hundreds of cell towers, the company sold roughly 340 mobile antennas within a matter of weeks to Japan’s Softbank to replace those that were destroyed. It also shipped 112 mobile antennas to South Africa in a span of a few weeks.
“I don’t think any of our competitors would be able to deliver this quickly, as there is usually an 8-10 week lead time,” says Klein, adding that its fast delivery capabilities that allow it to respond quickly to emergency situations can also distort its financial picture. In 2011, the company’s sales jumped to nearly $19 million from $10 million in 2010.
“It’s the nature of the business, but we still would have grown by 30% in 2011 if you removed the effects of the tsunami.”
The most remarkable part of this is that the company was able to keep up with the demand without increasing its headcount. “Everything is outsourced. We design everything in-house, but then we send it out to local manufacturers, who produce them locally in Ottawa. This allows us to verify quality before delivery and we retest the product over satellite again prior to shipping them out by air in most instances to our customers.” It outsources not only its manufacturing but also sales and first level support through its resellers worldwide, a model that fits perfectly with the diverse geographical footprint of a product sold in territories as far afield as Siberia and Australia.
The company’s iNetVu products are proprietary auto-deploying, vehicle-mounted antennas for the delivery of two-way high speed, mobile internet services into vehicles or other transportable structures. The technology is unique, in that it delivers high speed internet in locations where there might be no other means of gaining connectivity.
“We were one of the first out of the gate with Ka-band satellite antenna providers,” says Klein, with the company recently securing a series of approvals from a number of Ka-band satellite antenna providers for its products.
In September of this year, the company announced that Hughes Network Systems had qualified C-COM’s new generation iNetVu Ku-981 antenna for use with the satellite provider’s systems, to be deployed on all networks around the world that use Hughes HN/HX systems satellite equipment. This news came less than a fortnight after the company announced type approval from Avanti Communications – which provides superfast broadband satellite in Europe, Africa, the Caucasus and the Middle East, for its iNetVu Ka-98G antenna system.
“We are continuing with this process, with some new products currently undergoing approvals.”
Klein says the company is unique on the Ka-band side – a microwave band that covers a range of certain frequencies -- as “there is nobody really with this price performance ratio that has these types of products available to the marketplace.” C-COM’s manufactured Ka-band antennas are a first in the market with an auto-polarization function that removes one of the major complications of operating a mobile antenna at this spectrum. The feature enables the automatic transition between two overlapping high-power beams, which ensures full coverage of primary markets. Klein also mentions that the new Ka-band satellites on which these antennas are used deliver 100 times more bandwidth than existing Ku-band satellites, and both the air time and hardware costs of Ka-band antennas are less expensive than Ku-band.
The company has deployed some 6,000 antennas in many different vertical applications, with no shortage of uses for the product – from mining and disaster management to oil and gas exploration and telemedicine.
C-COM’s financials are no better proof of its products’ widespread adoption. In the latest third quarter, net profit surged as revenue rose 25% to $3.08 million, with the company deciding to boost its quarterly dividend by 25%.
But the company’s growth plan does not end here, as Klein foresees a number of new types of applications opening up around the world for its mobile antennas, such as satellite news gathering customers and clients that require communication for mobile health centres in remote regions like Africa. “C-COM is constantly in discussions with satellite providers to integrate into their solutions, as well as with telecom companies,” asserts Klein.
The company also in the summer inked a strategic partnership with Vislink (LON:VLK), under which the U.K.-based secure communication technology provider would promote, market, sell and support the C-COM manufactured range of iNetVu products. “Vislink has a lot of these [satellite news gathering] customers and we hope to be able to combine our antennas with their technologies and sell them cost effectively to their customer base,” says the C-COM CEO.
The partnership should help spread the word about C-COM, which is targeting a market that is ever expanding. “Ka-band service is opening up Africa in a very big way, as satellite coverage in previous years was spotty and expensive. It’s a large continent that is underserved, and everyone needs Internet these days, which we hope will contribute to our bottom line,” says Klein, with hopefully the same adoption trend happening in South America, where there is a similar shortage, mainly because of costs.
C-COM, which counts Halliburton, Rignet and Petrobras as its clients (among a number of other oil and gas service companies around the world), is also looking at the oil and gas market as a means for expansion, with this industry buying the company’s antennas for “reliability and cost-effectiveness”, Klein opines.
Klein has a vested interest in the Ottawa-based company’s growth profile, owning as he does 40% of the stock, with the remainder held by retail shareholders in Canada, the U.S. and Europe. It could be appealing for a wider shareholder base too, as a risk-averse market is increasingly turning to companies that pay dividends, and generate strong returns. “As long as the company continues to generate surplus cash, which we have over the last 10 years, we will aim to hand it back to shareholders and continue to provide dividends.”
So far this year, C-COM’s stock has surged over 170%, with a 52-week range of 62 cents to $2.37. It has a market cap of some $64 million.