Stratech Group

[specuvestor]

^^ Interesting that Edge figures and representations are different from HK airport

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.

[KFX]

Page 9 of Phillip report

a. Now, it has a market cap of > S$40mil.
b. FY2014 results showed a pre-tax profit.

Based on the SGX Listing Manual (Chapter 13, Part V, 1314), I understand that Stratech would need to maintain an average daily market cap of $40m or above over the last 120 market days on which trading was not suspended or halted. Given this, I believe Stratech would need to be trading at an average of 0.06 and above from now till June 2015. Would SGX grant Stratech an extension?

Has any value buddies encountered such situation and wouldn't mind sharing your insights with us? Thanks

Rdgs

[egghead]

The two numbers are about there. However, the time period means that it should be $50 million over 7.3 years (850 days plus 5 years) or specifically, $34 million over first 2.3 years; and then $16 million over the following 5 years.

[specuvestor]

$199.64 mil + $79.332 mil =$279 mil HK dollar
Based on current exchange rate, $279 mil HK = ~ $47mil SGD

So roughly, the 2 figures are about the same, albeit some small difference due to FX movements. tks.

For simplicity, I just take $50mil over the period of 5 yrs. ("no grapping numbers from air") tks.

^^ Interesting that Edge figures and representations are different from HK airport

Agree on the total value... I missed the phrasing there.

But I disagree with your maths. The 5 years refers to AFTER installation maintenance. Say if we use 2 years for installation then u need to spread out $47m over 7 years which is about $6.7m based on your Edge figures.

The HK airport figure is much more precise and the cashflow is as per I posted. The misrepresentation of Edge regarding DAS and Stratech is glaring.

Since you want to be more specific to your assumptions, say if you use HK airport case, and assuming we say the contract is with Stratech and not DAS ie full 100% accreditation, the revenue per year would be roughly HK$86m a year for the 28months (not 5 years, and I dont know how you get $50m over 5 years in your working above) so say FY2016 and FY2017. Profit at NPM of 20% (which prima facie doesn't seemed the case from 2009-11 results when Changi started, but let's be optimistic) would be HK$17.2m.

Thereafter the maintenance contract is HK$16m a year for FY18-22 and let's say 50% margins for maintenance ie HK$8m

At 10X Forward PE FY2016 what do you think is the value of HK airport contract to Stratech assuming 100% accreditation, bearing in mind 10X PE effectively means like you said steady state of getting at least one such project a year? And of course multiplies anything by 30 will be a very big number, if they can actually scale 30X in the real world, not some numbers extrapolation.

IMHO if they can secure one a year by themselves and one like the HK deal, it would be very good already based on the past 6 years track.

Grabbing numbers from air refers to this with NPM 50%/ 20% and recurring profit of $300m / $40m and 60 airports a year:

http://www.valuebuddies.com/thread-6382-...#pid111920

[littleones]

Stratech had a difficult past but its fortunate is changing and people are taking notice of this.

Of the five FOD detection systems approved by FAA, I can confidently say iFerret is the best. Its night vision superiority allows night time visual confirmation of FOD whereas the rest are unable to do it.

Because it is using vision technology instead of radar imaging, iFerret is also expandable to include airport surveillance, runway pavement monitoring and battle damage assessment. Its iVACs can also be used for train undercarriage monitoring and that is in their plans.

There are many more under its sleeves but let Stratech announce it at the appropriate time

[Curiousparty]

60 airports
2% x 10,000 = 200 airports with possibility of FOD automation.
If Stratech manages to corner 30%, 0.3 x 200 = 60 airports.
Finally, "20 airports" at steady state is assumed.

Net Profit Margin
Is 20% NPM an unreasonable assumption?
http://pages.stern.nyu.edu/~adamodar/New...argin.html

Spreading of contract value
many tks for the suggestion. Will spread $47mil over 7 yrs.

[Curiousparty]

I have reworked based on some suggestions. Any further suggestions pls?

_______________________________________________________________________

1. 33% of revenue each year goes to partners for each airport (just a general assumption)
2. $47mil over 7 yrs = $6.7 mil per year (Hong Kong airport case, just an example)
3. So, Stratech gets to keep say $4.5 mil per year
4. NPM = 20%. So net profit per year (over the 7 yr period) = $0.9mil (per airport like Hong Kong)
5. Say, overall, Stratech manages to secure contract for 30 airports at steady state, we would have ~ $27mil per year (over 7 yrs)
6. Assume P/E of 10, market cap works out to be $270mil.

Current market cap (as of 6 May 2015) = $53mil

[CY09]

Hi Curiousparty, thanks for creating the projections.

Number looks quite nice if earns $27 mil per year under the condition that it can secure 30 airport contracts over a 7 year period. The assumption is a growth rate of 450% for Stratech's product. That said Stratech's potential is really dependent on its ability to get tenders. If it secures a growth rate of double its contract, it means it will secure 10 airport contracts over the next 7 years; that means future earnings is $9 mil per year. If Stratech maintains the trajectory, 5 new airports contract over the next 7 years, it means earnings will be only $4.5 mil per year.

[Curiousparty]

Various Scenarios:-
a. 20 airports over next 7 years - $180mil market cap or 11.5 cents
b.15 airports over next 7 years - $135mil market cap or 8.6 cents
c. 10 airports over next 7 years - $90mil market cap or 5.7 cents

Current market cap = $53mil or 3.4 cents.

As mentioned previously, the same risk factors would apply as per posting #80.
________________________________________________________________________________________________________________________

Hi Curiousparty, thanks for creating the projections.

Number looks quite nice if earns $27 mil per year under the condition that it can secure 30 airport contracts over a 7 year period. The assumption is a growth rate of 450% for Stratech's product. That said Stratech's potential is really dependent on its ability to get tenders. If it secures a growth rate of double its contract, it means it will secure 10 airport contracts over the next 7 years; that means future earnings is $9 mil per year. If Stratech maintains the trajectory, 5 new airports contract over the next 7 years, it means earnings will be only $4.5 mil per year.

[Curiousparty]

Extracted from Nextinsight.

*******
http://www.nextinsight.net/index.php/sto...securities

"Investment Actions
We do not provide a rating but we look at two scenarios and possible values of the stock. Contingent on the successful adoption of the iFerret globally, Stratech's stock value could range from 4.0 Cents (steady state) to 6.9 Cents (high-growth stage) based on P/B valuation methodology."