Gatekeeper Systems (TSX: V GSI, Stock Forum) (18 cents)
www.gatekeeper-systems.com
Shares Outstanding: 63M / $13M market cap
Annual revenue currently in the range of $6M
In August of 2012 I started following an Ottawa technology company at 45 cents called
Espial (TSX: ESP, Stock Forum) ($3.88). For the longest time the investment community ignored the potential of Espial. Eventually they attracted institutional investors and raised money in higher stages.
Now they trade 750% higher than they did in Q3/12.
image: https://www.stockhouse.com/getmedia/0640ba88-bf63-4867-a881-a344d36ba1b7/esp-chart?width=450&height=250
image: https://www.stockhouse.com/getmedia/0640ba88-bf63-4867-a881-a344d36ba1b7/esp-chart?width=450&height=250
image: https://www.stockhouse.com/getmedia/0640ba88-bf63-4867-a881-a344d36ba1b7/esp-chart?width=450&height=250
It is still too early to tell, but Gatekeeper could be a similar tech success story in the making. They have an attractive valuation, unique high demand technology (applicable to many industries), and the investor audience at this stage is small.
If they continue to fire on all cylinders through 2016, we could see their market cap change dramatically from this 20 cent level.
RECENT TAKEOVER RELEVANCE
In September it was announced that CEB Inc. (CEB:NYSE $74) was acquiring Wanted Technologies WAN:TSXV) for approx. $45 million. Wanted had about $5 million in net assets so CEB was paying roughly $40 million for their technology. Their annual revenue was in the range of $10 million with a small profit so
the revenue multiple was approx. 4 times. Of particular importance to Gatekeeper, was the fact that Wanted specializes in
data analytics. This is a unique but highly valuable segment of the tech industry.
My focus with Gatekeeper was initially on the large market potential for their new body cameras and their future revenue sharing contracts with school divisions, but with the acquisition of Wanted, it is now obvious the potential is much more than this.
1)
GSI near 20 cents trades about 2 times revenue. A fair value but low compared to the WAN acquisition and also low compared to the potential revenue growth.
2) Data analytics is taking on greater importance and
Gatekeeper has something very unique and potentially very valuable - their ability to monitor and analyse "video" data. This is something they have proven for years - including their contract with the U.S. military on their AC130 gunship.
3) Within the security industry,
the transition from analog cameras to High Definition (HD) is just getting started. In the fixed site industry (buildings for example) only 20% of cameras are HD. In the MOBILE space (where Gatekeeper specializes) they estimate less than 1% of cameras are HD.
4)
The market for fines associated with stop-arm violations (passing a stopped school bus) is surprisingly large in North America - in the range of $1 Billion annually. Gatekeeper provides the most advanced system on the market for this. Their cameras not only capture license place data (part of their evidence package), but their data management system integrates with state licensing so they can automatically issue a ticket. In time this side of their business could be very lucrative.
They are the only company I am aware of that offers a “complete” end-to-end solution. image: https://www.stockhouse.com/getmedia/51565170-45df-4ea9-bdad-a5b798ff4421/fully-integrated?width=450&height=292
image: https://www.stockhouse.com/getmedia/51565170-45df-4ea9-bdad-a5b798ff4421/fully-integrated?width=450&height=292
image: https://www.stockhouse.com/getmedia/51565170-45df-4ea9-bdad-a5b798ff4421/fully-integrated?width=450&height=292
[If the above is hard to read, this slide is available on page 8 of their corporate presentation:]
https://www.gatekeeper-systems.com/images/documents/Presentations/Corporate_Presentation_02-03-15-V1.pdf You can also get more information on this segment of their business here:
https://www.gatekeeper-systems.com/index.php/school-bus October 14th Gatekeeper had an important announcement - in the State of Georgia they secured their first contract using the above technology under a
“revenue-sharing” model.
If proven successful (which it should be), the potential revenue stream is very large as this can be cookie-cut across school divisions and states.
Gatekeeper gets 50% of ticket fees and tickets range from $300 to $1000.
In the United States there are approx. 12,000 stop-arm violations PER DAY.
“Ownership of Student Protector equipment and TIM, a proprietary software application, remains the property of Gatekeeper, thereby providing a zero-capital-cost solution to school districts while enabling them to share in stop-arm violation ticket revenue.”
image: https://www.stockhouse.com/getmedia/a6d76cce-8d2a-409e-8489-007975d17685/fully-integrated_1?width=450&height=292
image: https://www.stockhouse.com/getmedia/a6d76cce-8d2a-409e-8489-007975d17685/fully-integrated_1?width=450&height=292
image: https://www.stockhouse.com/getmedia/a6d76cce-8d2a-409e-8489-007975d17685/fully-integrated_1?width=450&height=292
5)
The body camera business is big but it is the Management of that data that becomes very valuable - and the technology to manage that data. There is camera competition within the industry BUT the management of that data is just as important as the camera itself because it needs to be part of evidence for years - and how does law enforcement possibly plan on tracking or locating the enormous amount of data that will be collected? Gatekeeper along with a state-of-the-art HD camera will provide a complete end-to-end solution for this industry and it will allow them to compete head to head against Taser International.
Not only is this video data management system applicable to law enforcement body cameras, but it can eventually be applied to cell phone video, broadcast video and CCTV video. In theory, it is an enormous future market.
This weekend Gatekeeper is attending the International Association of Chiefs of Police (IACP) conference in Chicago - approximately 14,000 public safety professionals are expected to attend. Here are 2015 news stories to bring you up to speed on the Body Camera industry
: https://www.cbsnews.com/news/justice-department-statistics-shed-new-light-on-police-body-cams-tasers/ https://www.nytimes.com/2015/07/31/us/through-lens-of-video-a-transformed-view-of-police.html?_r=0 https://abcnews.go.com/ThisWeek/video/body-cameras-shine-spotlight-police-32838003 https://www.abc15.com/news/state/the-pros-and-cons-of-police-body-cameras https://www.abcnews4.com/story/29651735/sen-scott-starts-push-for-body-cameras-for-police-across-the-country __________________________________________________ SUNGARD PARTNERSHIP
Also of significant importance is a partnership they signed August 20
thwith Sungard.
I am expecting this will help them grow U.S. market share significantly in 2016. Sungard will be with Gatekeeper in Chicago this weekend.
https://www.stockhouse.com/news/press-releases/2015/08/20/gatekeeper-systems-signs-strategic-reseller-agreement-with-sungard-public Sungard (
www.sungard.com) /
https://en.wikipedia.org/wiki/SunGard Sungard founded in 1983 SunGard provides software and services to education, financial services, and public sector organizations. Their annual revenue is in excess of $2 Billion.
CORPORATE PRESENTATION (needs to be updated, but useful):
https://www.gatekeeper-systems.com/images/documents/Presentations/Corporate_Presentation_02-03-15-V1.pdf This recent audio interview is very insightful:
https://www.gatekeeper-systems.com/index.php/gatekeeper-in-the-news1 _____________________________________________________________________
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