Stratech Group

[Clement]

Hi All,

Just to chime in, I don't think the HK airport contract is worth anywhere near $50 million to Stratech.

This is the official tender award.

https://www.hongkongairport.com/eng/busi...ract-award

The award is to Dah Chong Hong - Dragonair Airport GSE Service Limited, who presumably will be performing most of the systems integration and most of the maintenance work on the contract. Stratech might be more of a technology partner/provider in the deal.

[specuvestor]

^^ Agree that CP could just have quoted from his own post #2 #9, and yes the project value to Stratech is likely much lower

Steady state assumption when fixed costs have been covered.
taking reference from comparable software companies.

Let's do a more conservative approach.

30% of automated FOD market = 60 airports.
1 airport per annum = $10mil revenue
30% of this revenue goes to marketing agency
Hence 1 airport will earn $6.6mil revenue per year.

60 airports will earn $396 mil revenue per year. Let's take a 50% discount. 60 airports will net $200mil revenue per year.

NPM - let's assume to be just 20%.
We have net recurring profit = ~$40mil per year.

Assuming a P/E ratio of just 10, market cap should be around ~$400mil.

10 multi-baggers?

The market size for automated FOD (say) 2% of the total airports around the world.

There are ~ 10,000 big airports around the world (7000 commercial + 3000 military).

2% of 10,000 = 200 airports. Of these 200 airports, assume that iFerret corners the market by 30%, this will give 60 major airports.

Each airport contract size ~ $50mil over 5 years => $10mil of revenue per annum.

Assuming net profit margin of 50%, $5mil net profit per airport per year.

At steady state, 60 airports x $5mil net profit per year = $300mil net profit gain (recurring per annum)!!!!!!

Current market cap of Stratech is only ~ $36 mil
******

Does the above make sense?

Why do you assume 50% net margin ? Their 1H 15 result net margin was 1.3%.

(Not Vested)

Your projections reminds me of another counter called Inter-Rollers now called Pteris

Projects are not recurring revenue nor profits

[level13]

Why do I get the feeling that it seems like we are in the dotcom era once again.

During the dotcom era, people are always looking for the next 'hot' tech stuff.
Companies which have low or no sales can be valued at a high price just because the
technology they have seems promising.

Is this how value investing should be carried out?
For me the rule I follow is simple:
Show me the $$ first!!!

[littleones]

Hi All,

Just to chime in, I don't think the HK airport contract is worth anywhere near $50 million to Stratech.

This is the official tender award.

https://www.hongkongairport.com/eng/busi...ract-award

The award is to Dah Chong Hong - Dragonair Airport GSE Service Limited, who presumably will be performing most of the systems integration and most of the maintenance work on the contract. Stratech might be more of a technology partner/provider in the deal.

Dont worry. Stratech, being the solution provider, will get the lion share of the revenue from the tender

[Clement]

Hi All,

Just to chime in, I don't think the HK airport contract is worth anywhere near $50 million to Stratech.

This is the official tender award.

https://www.hongkongairport.com/eng/busi...ract-award

The award is to Dah Chong Hong - Dragonair Airport GSE Service Limited, who presumably will be performing most of the systems integration and most of the maintenance work on the contract. Stratech might be more of a technology partner/provider in the deal.

Dont worry. Stratech, being the solution provider, will get the lion share of the revenue from the tender

Hi,

I am not too sure about that.

In IT systems implementation projects, the services provider (systems integrator) normally gets a fairly large portion of the total contract value.

It really will depend on how the deal itself is structured and the roles of each party. My point was that it is inaccurate to attribute the entire $50 million contract value to Stratech.

[specuvestor]

Hi All,

Just to chime in, I don't think the HK airport contract is worth anywhere near $50 million to Stratech.

This is the official tender award.

https://www.hongkongairport.com/eng/busi...ract-award

The award is to Dah Chong Hong - Dragonair Airport GSE Service Limited, who presumably will be performing most of the systems integration and most of the maintenance work on the contract. Stratech might be more of a technology partner/provider in the deal.

Dont worry. Stratech, being the solution provider, will get the lion share of the revenue from the tender

Hi,

I am not too sure about that.

In IT systems implementation projects, the services provider (systems integrator) normally gets a fairly large portion of the total contract value.

It really will depend on how the deal itself is structured and the roles of each party. My point was that it is inaccurate to attribute the entire $50 million contract value to Stratech.

The dynamics is usually the SI has larger value but low margins while the OEM has higher margins.

[Clement]

Hi All,

Just to chime in, I don't think the HK airport contract is worth anywhere near $50 million to Stratech.

This is the official tender award.

https://www.hongkongairport.com/eng/busi...ract-award

The award is to Dah Chong Hong - Dragonair Airport GSE Service Limited, who presumably will be performing most of the systems integration and most of the maintenance work on the contract. Stratech might be more of a technology partner/provider in the deal.

Dont worry. Stratech, being the solution provider, will get the lion share of the revenue from the tender

Hi,

I am not too sure about that.

In IT systems implementation projects, the services provider (systems integrator) normally gets a fairly large portion of the total contract value.

It really will depend on how the deal itself is structured and the roles of each party. My point was that it is inaccurate to attribute the entire $50 million contract value to Stratech.

The dynamics is usually the SI has larger value but low margins while the OEM has higher margins.

Exactly.

That is what i would expect in this project unless DAS role is to merely to provide a way around "qualified supplier" requirements.

[BlueKelah]

Listed since 2004, ten years liao, bo dividend and keep asking for money. 4 rights issue every 2-3 years. Yesterday kana SGX query on trading volume spike. Will it have some more rights issue again? sell cheap cheap to SIA company can liao lah.

Fundamentals looks like an S-chip leh.

waste of time.

[littleones]

Listed since 2004, ten years liao, bo dividend and keep asking for money. 4 rights issue every 2-3 years. Yesterday kana SGX query on trading volume spike. Will it have some more rights issue again? sell cheap cheap to SIA company can liao lah.

Fundamentals looks like an S-chip leh.

waste of time.

iFerret got FAA endorsement and buy American waiver in 2012. Since then it have secured three contracts: Dubai, USAF, HKIA. Its test beds are at Changi Airport (2008) and Chicago O'Hare (2009). On going negotiation includes quite a few airports. Should see revenues spike up in 2016 reporting season.

[Curiousparty]

The Edge Singapore, April 20, 2015

To ensure Stratech Group comes out ahead of the pack, Chew's strategy is to "focus on bidding for jobs by premium airports so we can call for premium prices.

With the iFerret, we have a mega product that will bring in millions of dollars for every single system installed and there are thousands of airports out there with more than just one runway".

For instance, Stratech Group is currently in negotiations to install the iFerret in six runways at a major international airport, which will raise the value of that contract by 60%, if it goes through.

Stratech Group is also working on making additional revenue from recurring maintenance work of existing iFerret systems.

*********

The Business Times Singapore, April 7, 2015 Tuesday

"In the last 12 to 18 months, there's been a lot of focus on aviation safety," Mr Chew said. The group is also establishing corporate entities in the Middle East, China and Europe to help tap business opportunities.

Mr Chew added: "If we find a partner in China that would help us be a dominant player in the aerospace arena, that would be a home run for us."

Another potential growth market that it has singled out is the US, where iFerret was certified by the Federal Aviation Administration (FAA) in 2012, making it one of four systems worldwide to be approved by the US aviation authority. In addition, iFerret as been granted a "Buy American" waiver by the FAA, which otherwise requires major projects that receive grants under the Airport Improvement Programme (AIP) to use systems that are US made.

"We're confident there will be quite a bit of traction this year," Mr Chew said, adding that the group has done a lot of "groundwork" in the US for business development. He thus reckons that purchases from potential customers in the US will start to come in this year.

"The market is indeed ready to take off. What the FAA has done is set the standard for airports globally to follow," he said. Stratech, along with other market players such as UK-based QinetiQ Tarsier and Israel's X-Sight FODetect, are among those carrying out a pilot site in the US. Funding for the first of three runways under the AIP programme is expected to be announced soon, he added.

Aside from securing contracts for its systems from global customers, Stratech is eyeing maintenance contracts, which could help provide a steady stream of recurring revenue.