Stratech Group

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?

http://www.stratechsystems.com/news/p_news145.html

Stratech’s iFerret™ Wins in Hong Kong

Singapore, 24 February 2015 – Singapore Exchange Mainboard listed Stratech Systems Limited ("Stratech") is pleased to announce that its iFerret™ intelligent Airfield/Runway Surveillance and Foreign Object & Debris (FOD) Detection System has won in a tender for an Automated FOD Detection System at Hong Kong International Airport (HKIA).

This1 was achieved in cooperation with Dah Chong Hong – Dragonair Airport GSE Service Ltd. (DAS), who was awarded two contracts with a total value of around HK$280 million (approximately US$36.88 million) by the Airport Authority of Hong Kong (AAHK) for (1) the Design, Supply and Installation of an Automated FOD Detection System (Electro-optical System); and (2) the Maintenance of the Automated FOD Detection System (Electro-optical System) for a period of 60 months, plus an option for a further 24 months. DAS is a joint venture between Dah Chong Hong (Motor Service Centre) Ltd. and Hong Kong Dragon Airlines Ltd.

Stratech Executive Chairman, Dr. David K.M. Chew, commented, “We are honoured that our state-of-the-art iFerret™ has been selected to be installed at Hong Kong International Airport, one of the prominent international airport hubs and home to one of the finest airlines in the world. In this tender, we have again clearly won over the other systems. iFerret™ is indeed the future of airfield safety and security!”

Approved by the US Federal Aviation Administration (FAA), iFerret™ is the world's first intelligent Vision-based airfield surveillance and FOD detection system, providing real-time, automated FOD detection, location, classification, measurement and recording. It can be deployed in civil airports as well as military air bases, to help prevent potential aircraft damage and fatalities caused by FOD.

iFerret™ is future-proof. Designed to operate passively with zero emissions, the system does not interfere with existing airport and aircraft systems. Most importantly, it will also not interfere with future expansions and airport improvements. Operating away from the runway, detached from other mission-critical systems and infrastructure, there is no need for runway closures during installation and maintenance of the system. These qualities ensure uninterrupted flight operations, which are critical for busy airports.

“We are extremely proud to be awarded this prestigious project for Hong Kong International Airport. We look forward to executing and delivering this project successfully and to be contributing to the airport's safety and operational efficiency,” said Ms. Angel Cheung, General Manager of Dah Chong Hong – Dragonair Airport GSE Service Ltd.

iFerret™'s other prominent deployments include Changi International Airport in Singapore, where it has been in operation for more than five years, and Dubai International Airport in the United Arab Emirates (UAE), which has recently overtaken London Heathrow Airport to become the busiest international airport in the world2. It has also been recently installed and commissioned at an air base of one of the world’s top Air Forces.



1.) Works Contract M767-4 and Maintenance Contract M298-4 – Automated FOD Detection System (PRO/T071/14/EH)

2.) Dubai Airport passes London Heathrow to become the busiest airport in the world

http://www.stratechsystems.com/news/p_news146.html

Stratech Systems restructures and relists as The Stratech Group

•Group now in stronger position to pursue growth opportunities to achieve a sustained earnings turnaround and unlock shareholder value
•Key products using its proprietary intelligent Vision technology to spearhead growth
•US FAA-certified iFerret™ for airfield/runway surveillance and foreign object & debris (FOD) detection is fast gaining acceptance worldwide

Singapore, 6 April 2015 – Today marks the re-listing of the Stratech Systems Limited group of companies (Stratech Systems) as The Stratech Group Limited ("Stratech" or "the Group") after its scheme of arrangement (the Scheme) under Section 210 (Chapter 50) of the Companies Act of Singapore was approved by all its shareholders at the Court Meeting and Extraordinary General Meeting on 2 February 2015.

Under the Scheme, Stratech Systems and its subsidiaries are now held under a newly formed intermediary holding company that is wholly-owned by Stratech, whose 1,567,183,371 issued ordinary shares are now listed on the Main Board of the Singapore Exchange Securities Trading Limited ("SGX-ST").

The Group, founded by Executive Chairman Dr. David K.M. Chew (周健謀), is best known for its proprietary real-time video and image-based intelligent Vision technology. First developed in the 1990s, intelligent Vision combines cutting edge video analytics with advanced electro-optics sensor technology to provide surveillance and security solutions for the aerospace, land transport and maritime surveillance and security industries.

Dr. Chew said: "Stratech is one of the few Singapore technology innovation companies that have been able to make inroads into the world's rapidly growing surveillance and security industry."

"We plan to further streamline our key product groups into distinct operating subsidiaries to capture the vast opportunities unfolding for the products we have developed using our very own intelligent Vision technology."

Two of the Group's flagship products are the iFerret™ intelligent Airfield/Runway Surveillance and Foreign Object & Debris (FOD) Detection System and the iVACS® intelligent Vehicle Access Control System. Stratech's other products include Super BullsEye® Advance Weapons Scoring System for defence exercises, the VIPS® Vessel Identification and Positioning System and the VHSS (powered by VIPS®) Vessel Height Surveillance System.

iFerret™, which was certified by the United States Federal Aviation Administration (FAA) in March 2012, is swiftly gaining acceptance in the global aerospace industry. In February 2015, Stratech and its local Hong Kong partner were awarded the HK$280 million (or about USD$36.88 million) automated FOD detection system contract for the Hong Kong International Airport. Other global hubs that iFerret™ secured include Changi International Airport in Singapore which has been monitoring both its runways for almost 6 years, Dubai International Airport in the United Arab Emirates and O'Hare International Airport in Chicago in the United States of America which is for the FAA performance assessment. Moreover, this now-acclaimed system was also recently successfully installed at an air base under one of the world’s top air forces, opening up a largely untapped market.

The Group estimates that there are more than 7,400 International Air Transport Association registered commercial international airports around the world with an approximate market value of at least US$67 billion for FOD detection systems.

Meanwhile, iVACS® has made inroads into the Middle Eastern markets. One is for a prominent Smart City Project there. iVACS® screens vehicle undercarriages for potential security threats from devices such as explosives and gives alerts when suspicious foreign objects or modifications are detected. The system also screens the identities of vehicle drivers and passengers.

iVACS® protects critical infrastructure globally across six continents – Asia, Africa, Australia, Europe, North America and South America – and is in service, among others, with the Interpol Headquarters in Europe; the United Nations; two US Government Agencies' Headquarters in Washington, DC; an overseas facility of a US Government Department; a US Government Agency secure facility in Detroit; and a US Government Agency secure facility in Kansas City.

Commenting on Stratech's prospects, Dr. Chew said: "Our intelligent Vision technology is an advanced platform that enables Stratech to provide our clients with customised surveillance and security products such as the iFerret™ RADAS (Rapid Airfield Damage Assessment System)."

"Based on the keen interest we have seen and as our products gain market share, we are optimistic about achieving a sustained earnings turnaround, as well as growing a recurrent income stream and unlocking value for our shareholders."

The contract with Hong Kong Airport which has only 2 runaways is worth S$50mil.

Imagine how much the contract would be worth, if Stratech manages to secure contract from an airport with 6 runways?
(See highlighted section below, extracted from Edge)

Federal Aviation Administration has endorsed iFerret. Does this constitute some kind of economic moat?

Finished firmly today at 2.5 cents. Now it seems that 3 cents should be target next week

(30-04-2015, 09:23 PM)Curiousparty Wrote: Federal Aviation Administration has endorsed iFerret. Does this constitute some kind of economic moat?

The question you need to ask is whether is the technology unique and patented and therefore, are there any competitors.

I am not really into Stratech, but I am familiar with video content search technology and I can tell you that what they do with cameras is nothing special.

A quick search on Google indicates a number of FOD detection systems around; this problem statement is not unique and it would not come as a surprise that there are various solutions.

FAA certification:
http://www.xsightsys.com/faacertification1

(30-04-2015, 09:23 PM)Curiousparty Wrote: The contract with Hong Kong Airport which has only 2 runaways is worth S$50mil.

Imagine how much the contract would be worth, if Stratech manages to secure contract from an airport with 6 runways?
(See highlighted section below, extracted from Edge)

Federal Aviation Administration has endorsed iFerret. Does this constitute some kind of economic moat?

Finished firmly today at 2.5 cents. Now it seems that 3 cents should be target next week

-1
EPIC FAIL

yes, we know that there are 3 kinds of solutions and iFerret has competitors
1. manual
2. radar
3. iFerret (Artificial intelligence)

***

Three players
Stratech does not have the market entirely to itself, though. According to Chew, there are at least two competitors in the FOD surveillance systems space. He adds that the industry has high barriers to entry because it is tightly regulated and involves significant investment in technology and intellectual property. ' There are only four systems that have been certified, one of which is mobile and smaller,' Chew explains. ' That boils down to only three players, including ourselves, in the fixed system side of things.'

Besides monitoring airport runways, Stratech is also applying its technology to security surveillance systems. ' Some of the most secure facilities in the world are protected by technologies made [by us] in Singapore,' Chew claims. These include the headquarters of the US Department of Homeland Security in Washington, DC; the headquarters of the Federal Reserve in DC; the headquarters of the Federal Reserves of Detroit and Kansas City; the Interpol H=headquarters in Lyons; and two United Nations sites.
He adds that Stratech recently won a deal to provide 28 systems to Saudi Arabia' s Ministry of Interior. ' We are very strong in this area of security access control,' he says.
Not surprisingly, Stratech also claims to have an edge when it comes to security surveillance of airfields. ' Air bases in Singapore are protected by us, and we are right now in the midst of a massive tender for many of the military bases here,' Chew says. ' We want to focus on airfield surveillance because that is our crown jewel today. He adds that Stratech is now on the verge of winning a military-related contract. ' We hope to be able to release some good news from the military strandpoint soon.'

(27-04-2015, 10:26 AM)Curiousparty Wrote: 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)

The Edge Singapore

April 20, 2015

Corporate: Stratech restructures and relists to focus on demand for iFerret and other products


The fortunes of home-grown technology company Stratech Group look set to change for the better now that its star product, the iFerret, is generating more demand as airports and airlines take steps to raise safety standards in the industry. "With aviation safety a big issue now, the time is right for us to expand products such as the iFerret. As long as commercial jets continue to fly, we believe that there will continue to be demand for smart FOD detection systems," says David Chew, Stratech's founder and executive chairman.

An advanced airfield surveillance and foreign object and debris (FOD) detection system powered by Stratech's proprietary intelligent Vision technology, the iFerret automatically detects and classifies FODs such as tyre parts or maintenance equipment left on airport runways and taxiways so they can be removed before they pose a threat to aircraft taking off and landing. In 2000, a titanium alloy strip left on the runway by an earlier departing jet ruptured the tyre of a Concorde jet, which then struck a fuel tank, causing a fire and engine failure. All 100 passengers and nine crew on board, as well as four people on the ground, were killed.

This year, Stratech won a US$36.9 million ($50 million) contract to install the iFerret at Hong Kong International Airport. The contract also includes an agreement for Stratech to continue maintaining the system for five years after its installation as well as an option to extend the maintenance work for another two years. That contract comes just a month after Stratech won a contract to install the iFerret at Dubai International Airport for an undisclosed sum. The iFerret has been deployed at Singapore Changi International Airport since 2009 and is currently being tested for its performance at Chicago O'Hare International Airport in the US.

According to Airfleets.net, 2014 was one of the worst for the airline industry in almost a decade, recording 14 accidents and 863 fatalities. "There is an underlying fear that safety has become an issue, so airports across the globe have been revising their spending budgets to allow for a specialised system to prevent accidents whereas, in the past, many had relied solely on manual sweeps to check for FODs," says Chew. "The industry is only just waking up to the importance of technology in keeping their runways and taxiways clear and safe. Airports need to make sure flying is safe. No airport wants to be responsible for the next aviation accident."

It was in 1990 that technology buff and budding entrepreneur Chew set about develop¬ing
intelligent Vision, a smart visual technology that he believed would revolutionise the world of surveillance and security. About 70% of human sensory input is from vision; so, by building systems that can be taught how to process and react to visuals, Chew aimed to build Stratech around a range of market-leading products powered by intelligent Vision.

At that time, Stratech was also building and designing systems for the Singapore government. These included the medical claims processing system for the Prime Minister's Office of Singapore, the online Certificate of Entitlement Open Bidding System for the Land Transport Authority and the Parliament Reporting System. In 1996, Chew launched the first intelligent Vision product, the Super BullsEye, which automated target practice for the Ministry of Defence.
As it turned out, Chew was right about the significance of visual technology to sectors such as aviation and homeland security. The Sept 11, 2001 coordinated terrorist attacks by Al-Qaeda on New York City and Washington proved to be a watershed that changed the entire landscape of global security. In 2003, Chew launched iVACS, or intelligent Vehicle Access Control System, which screens the undercarriages of vehicles for security threats such as explosives. The system has been adopted by institutions such as the US Federal Reserve Bank and Interpol headquarters, which rely on homeland security.

But it was only in 2006 that iFerret was launched. With the help of government funding and support from the Civil Aviation Authority of Singapore, Chew managed to roll out the first iFerret pilot project in Singapore and was awarded his first contract with Changi Airport in 2009. However, approval from the FAA (Federal Aviation Authority) was granted only in 2012. Last year, Chew also decided to stop providing systems services to the Singapore government to focus on expanding his proprietary products.

"Although building systems for the govern¬ment has been a big part of the business, we are a technology innovation company. So, we decided to shed that business to focus on building up our own proprietary technologies and products," he says.

On April 6, Chew announced the restructuring and relisting of Stratech Group on the Mainboard of the Singapore Exchance after shareholders approved a scheme of arrangement for Stratech Systems - as the group was previously known - and its subsidiaries to be held under a newly formed holding company, Stratech Group. The move will enable the company to streamline its products into distinct operating subsidiaries to better keep track of revenue and gain better growth opportunities.

Chew says, "Our new structure will allow us to utilise our subsidiaries as smaller fighting ships to monetise our various intellectual properties. In the past, all the revenue and contracts for each of our products were channelled into Stratech Systems while our subsidiaries were pretty much dormant. Now, we are restructuring because our products are big enough to operate as standalone businesses and across different geographies."

For instance, Stratech Group will run separate offices in the US, the Middle East, China and Europe specifically to handle iFerret contracts in those markets. Chew says, "The iFerret is now expected to be the key revenue generator for Stratech Group. Things could really begin to take off and we need to be ready for it."

Indeed, there are currently more than 7,000 commercial airports registered with the International Air Transport Association, yielding a potential FOD detection systems market worth US$67 billion. At Changi Airport alone, runways are as long as 4.5km and up to 80m wide, requiring at least 12 iFerret cameras mounted along the runway. "Aside from runways, airports are also drawing up budgets for advanced FOD systems on rapid exit taxiways, taxiway crossings and parallel taxiways and airport aprons," says Chew. Airport aprons are where aircraft are parked, unloaded or loaded, and fuelled up or boarded.

As such, Chew reckons the iFerret is now in a good position to capture the lion's share of that market. For one thing, it is currently the only FOD detection system in the world that uses artificial intelligence and real-time visuals to monitor airport runways. "Our competitors use radars to sweep the runway for FODs. That is less effective than our system, which sweeps the runways with cameras and zoom lenses controlled by our own proprietary visual technology 24 hours a day," says Chew. "We believe intelligent Vision is the technology for the future, so we are vying for at least a 50% market share. Over the next 12 to 18 months, we will see a clear trend of adoption and market leader emerge."

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.


For the nine months to Dec 31, 2014, Stratech Group made revenues of $9.2 million, up 51% from the previous year. Meanwhile, the company managed to cut its losses by more than half to $1.7 million for the period. Stratech Group first fell into the red in 2011 as it began to wind down its services to the Singapore government and invest more in its proprietary products. Besides the iFerret, Stratech Group's other revenue-generating proprietary products currently include iVACS. Another intelligent Vision product, the Vessel Height Surveillance System helps airports make sure airplanes do not collide with nearby ships when taking off or landing over water.

Shares in Stratech Group closed on April 16 at a high of 1.8 cents apiece. At current levels, it has a market value of just $28.2 million. If Chew is right, investors could begin to see the shares rise in value soon.

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?

(01-05-2015, 09:20 AM)Nick Wrote:

(27-04-2015, 10:26 AM)Curiousparty Wrote: 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)