According to JPMorgan’s Global Head of Small and Midcap Equity Strategy Eduardo Lecubarri “It has never been easier to make money on small and mid-caps”. Economic data point to a continued recovery for the global economy, while central banks and governments have deployed unprecedented levels of monetary stimulus. Leveraging carrier channels, this company has a proven track record of innovation, performance and delivery. Qualifications with major North American and international carriers is complete and the company’s focus has shifted to rapid profitable growth, but is trading at only a $16 million market cap. Relative to peers this stock has 2.5-4.5 times upside from current levels.
Siyata competes in large market segments (TAM highlighted below), and it has prudently executed a differentiated strategy with its unique solutions to blue chip customers. Remarkable achievements for a small company which has been underappreciated by the capital markets. But this sentiment is shifting.
Siyata Mobile Inc. (TSX-V: SIM) is a leading developer and provider of cellular communication systems for enterprise customers. Siyata provides high quality and technologically
advanced in-vehicle mounted IoT communications devices and
rugged handsets for global first responders, and commercial fleet vehicles based on Push to Talk Over Cellular (PoC) technology.
The global pandemic has disproportionately negatively impacted small cap stocks, however Siyata has thrived as communication tools have become even more essential for work-from-home (WFH) and remote workers. This has been especially true for its line of
cellular boosters which provide enhanced in-building and in-vehicle connectivity which have been enjoying record sales in recent months. Link to video
here.
Product Portfolio (sold under the Uniden brand)
Investment Highlights - To date Siyata has delivered ~$78 million in sales, mostly with its legacy 3G products to international carriers. Q1 2020 marked a shift with growing sales to North American customers for its 4G portfolio, resulting in rising gross margin.
- Within North America, Siyata is qualified with AT&T, FirstNet, Verizon, Rogers, Bell; has partnered with Motorola Solutions; and works with many resellers and dealers including most recently, Vive Wireless.
- Siyata’s entry into the North American market began with its flagship device, the UV350, the first and only in-vehicle IoT communication device that is certified FirstNet Ready, representing a TAM of ~25 million units. An unexpected and large market for this device is FirstNet yellow school buses (AT&T video link here).
- The company is aggressively launching two other 100% complementary product categories into North America, rugged handsets (US$21 billion TAM) and aforementioned cellular boosters (US$8.2 billion TAM), again leveraging carrier channels; and online, most recently with Amazon.com.
- Leveraging the success Siyata has had with its dedicated AT&T sales team, it recently appointed a veteran salesman to manage the Verizon account. With that, it hopes to accelerate its sales opportunity pipe which has doubled year-over-year to a record $42 million.
- Given what Siyata has accomplished to date, and relative to its peers, Siyata shares are extremely attractive, trading at only 0.6x target EV/revenue and 3.1x target EV/EBITDA versus peers at 2.0x and 11.4x, respectively.
Catalysts for Profitable Growth AT&T’s FirstNet | infrastructure build is 80% complete serving 1.2 million subscribers and over 10,000 public safety entities. The next phase is a focus on sub growth.
Legacy analog Land Mobile Radio (LMR) | market is in decline (expensive and limited functionality), being replaced by new digital cellular PoC solutions. Siyata is the leader with its in-vehicle solutions which are designed for FirstNet and enterprise customers.
Cellular connectivity | for remote and WFH workers has gone from critical to absolutely essential and Siyata provides solutions in multiple market segments.
Rugged Handset | Siyata also plays in the more competitive rugged handset market but it offers differentiated solutions from its competitors which are uniquely tailored to customers’ needs.
Potential Home Runs | To date, Siyata has only sold its flagship device in North America, which forms the bulk of its current sales pipe, however, it plans to introduce the balance of its highly complementary product portfolio leveraging its same sales channels.
Accessory Sales | wired palm mics for PTT, roof mount antennas and other accessories can add $70 to $300 per unit sale.
Recurring revenue | sharing from third party fleet applications partnerships (e.g. enterprise mapping software). Plus, extended warranty beyond standard 1 year.
High operating leverage | due to very lean operating cost structure.
Attractive Valuation Siyata’s break-even is $5 million in quarterly revenue, which it should achieve in the coming quarters. A near term target operating model with $30-50 million in revenue should generate 40% gross margin with ~20% EBITDA margin. Long term target: 100,000 in-vehicle devices, translates into $100 million in revenue, for just this product category.
At Siyata operating model, implies it is trading at 0.5-0.8x EV/revenue or 2.5-4.0x EV/EBITDA, versus peers that trade at 2.0x and 11.4x, respectively. Achieving peer multiples implies 2.5-4.5 times upside from current levels, implying $0.27-$0.50 per share (450% gain from mid-point).
Over the coming weeks and months, watch for Siyata press releases is it continues to gain momentum the U.S. market with its disruptive solutions.
FULL DISCLOSURE: Siyata Mobile Inc. is a client of Stockhouse Publishing.