Donville Kent April newsletterIf this has been posted previously. sorry.
https://donvillekent.com/wp-content/uploads/2024/05/DKAM-ROE-Reporter-Final-April-2024.pdf
• Zedcor (ZDC)
o Zedcor is a security business based in Calgary that was born out of
an oilfield services company. Their initial clients were pipelines who
wanted to be able to monitor construction plus keep an eye on
expensive equipment at job sites. These locations can be extremely
off-grid and face all types of weather. Zedcor solved the problem by
designing and building free standing reliable security towers that can
be towed to location and powered by generator, solar, or electrical
plug-in. From the early days of serving a few pipeline clients, the
business has started to expand geographically as well as diversifying
industries. This type of service is designed for clients like
construction companies. They need the protection but the location of
their assets and acvtivity shifts as jobs are completed. Now having
years of data, Zedcor’s service has shown to have an extremely high
ROI for clients since each theft or vandalism incident can cost the
client thousands in equipment costs, damages, and lost productivity.
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Zedcor Stock Price 6
Figure 3 - MobileyeZ Fleet
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o You can checkout their latest investor presentation here.
o We recently visited their head office in Calgary, which was
invaluable because we got to see their technology being used in real
time. As it relates to AI, their cameras allow them to use a type of AI
called computer vision. This is where a machine can identify and
classify objects. For example, the tech can tell the difference between
a vehicle, human, animal, or movement that’s due to weather like
wind or rain. They are able to set alarm parameters to specific client
needs. By overlaying “red zones” on the video feed, they can set
alarms for specific locations, times, specific types of movements, and
also set the alarm preferences, alert guidelines, and protocols. Some
clients want their company manager to be notified, some want the
authorities to be called, some want the towers alarm system to go off.
o Using 4K cameras, they can cover significant distances and pick up
movement using both video and radar.
Radar with location and speed of 3 objects within the 70m red zone.
Figure 4 - Industry
Revenue Breakdown
Figure 5 - Zedcor Radar Example
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Red outline is overlayed on video to set alarm zone. Video pics up
and tags two people who entered the zone and alerts Zedcor.
o We think the stock is still underfollowed and cheap because there is
a perception that Zedcor is just an equipment company. Zedcor is
actually lending the equipment to the client who in turn is paying
Zedcor a monthly monitoring service fee. Some competitors simply
sell towers, others outsource monitoring offshore, but Zedcor offers
the highest-level service. That is why they are winning business from
the likes of Amazon, DH Horton, and Best Buy. Their backend
technology allows them to address hundreds of thousands of alarms
every day. This is a task that wouldn’t be possible without first level
automation categorizing and accurately flagging each incident. This
video surveillance as a service business strategy is much more
building and selling towers. Zedcor keeps the towers as high ROI
assets that provide meaningful multiple year recurring revenue.
o The ROI per tower for Zedcor is well over 20% and margins are set
to significantly improve as their historical utilization rate has
improved in 2024 from ~85% to near 100%. This improves margins
& cashflow, plus corporate fixed costs have reached a level to
support significant growth without needing much additional
infrastructure.
o In the Toronto area, car thefts are now in the news every single day.
It has actually become quite the issue. A lot of these cars are being
Figure 6 - Zedcor Video Monitoring Example
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stolen from large parking lots. Prime targets being distribution
centers, where employees work shifts and parked cars are vulnerable
for the many hours between shift changes. Zedcor towers have
proven to be effective, as they can target activity during shifts when
there shouldn’t be movement plus the potential to add license plate
readers. If the tower itself doesn’t stop the theft, alerting the
authorities in real-time of the make and model has already led to
arrests and is much more effective than a victim discovering the theft
hours later. We foresee significant growth in this type of scenario for
Zedcor.
o If they hit their projections, revenue growth will continue in the
~70% range and earnings will grow +100%7 .
o In summary, Zedcor is a high growth, profitable and cheap stock with
a long runway to re-invest at high rates of return.