GREY:LFDEF - Post by User
Post by
ice9997on Feb 07, 2017 2:14pm
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Post# 25811580
Sell side research
Sell side researchDundee, Feb 7th
UR Secures GEOSYS as Anchor Customer for UrtheDaily
We are reiterating our BUY recommendation following UrtheCast's announcement this morning on securing a long-term data purchase agreement with GEOSYS, a large global agriculture-focused analytics firm, for their planned UrtheDaily constellation. Separate from OptiSAR, UrtheDaily is another constellation, comprised of 8 satellites for continuous, daily global coverage of medium resolution imagery, that UR is ambitiously planning to build and launch by securing commercial customer contracts to ensure a non-dilutive financing to fund the project, i.e. through EDC or tier-1 banks. The ability to secure and name GEOSYS as a strategic customer at this early stage is a major milestone and we expect further announcements to come down the pipe. We continue to believe that the current share price represents a strong buying opportunity and recommend investors buy shares on the back of this and ahead of conversions of additional commercial contracts for UrtheDaily and/or the remaining MOUs for OptiSAR which are on the horizon.
Key Highlights:
• Another competitive win. Securing this long-term data purchase contract with GEOSYS was a competitive win based on an RFP process that included EO competitors focused on continuous global coverage such as Planet Labs (priv). Along with the OmniEarth partnership secured back in July 2016, signing GEOSYS further highlights the inherent value and sophistication of UR's technology platform which continues to attract strategic partners who have elected to partner vs. build after reviewing the platform potential when considering other lower-cost smallsat competitive offerings focused on daily global imagery collection.
• Closer to securing non-dilutive financing. Given GEOSYS and a number of other customers already signed to data purchase contracts for UrtheDaily, we believe management is closer to securing the remaining commitments needed to obtain export credit agency-backed financing from EDC (Export Development Canada) or a Tier-1 bank to commence build phase for the constellation. We believe total build costs could amount to ~US$100-200mm.
• GEOSYS positions UR as a leader in the massive Agriculture market. GEOSYS is a subsidiary of privately-held Land O’Lakes, a major global agriculture and food services organization. As the anchor customer on UrtheDaily, GEOSYS helps positions UR as a major geospatial data provider to the agriculture industry which represents a large total addressable market of $20-25bn/year.
Reiterating BUY recommendation and $4.00 per share price target:
Our $4.00/share target price is based on 14x our F17E adj. EPS, a discount to EO peers trading near 19x, further supported by our DCF analyses.