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Big-Time Communications Play = A Profitable Small-Cap Opportunity

Dave Jackson Dave Jackson, Stockhouse
5 Comments| April 7, 2021

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(Click image to play video)

The importance of clear, reliable communications cannot be understated. From smartphones to emergency broadband radio transceivers to advanced military / civilian satellite systems…every aspect of our everyday lives is dependent on state-of-the-art comms.

C-COM Satellite Systems Inc. (TSX-V.CMI, OTCMKTS: CYSNF, Forum) is an Ottawa-based technology company focused on research, development, and design of fully motorized, auto-deploy, mobile satellite antenna products – including its flagship product, eye-Net-Vu – a commercial mobile V-SAT system.

Established in 1997, C-COM is one of the largest Comm-On-The-Pause mobile V-SAT manufacturers in the world, developing highly disruptive antenna technology – also known as electronically steerable phased array. It offers systems to different vertical markets such as oil and gas exploration, synthetic natural gas, military communications, emergency communications, cellular backhaul, telemedicine, government services, mobile banking, and others.

In this exclusive and entertaining video podcast, Stockhouse Media’s Dave Jackson welcomed the he man at the helm of the company – Founder, CEO, President & Director, Dr. Leslie Klein – to talk about all things C-COM and what investors need to know about this kind of unique communications technology investment.

TRANSCRIPT BELOW:

SH: So, first off Dr. Klein, can you tell us a bit of background history about yourself?

LK: I am an electrical engineer. I have an MBA and a PhD as well. I have worked for some notable corporations, such as Hewlett Packard, and Bell Northern Research in its heyday before it became Nortel than it disappeared. I started a number of companies before, very successful companies. One was sold after about 30 years and I started C-COM in 1997 with the intent of developing internet connectivity into cars while in motion. And also while stationary, I'm a graduate of the university of Waterloo and we are developing some exciting new technology with the university and have been over the last four years. And I'm sure we'll touch on that. The company has been publicly listed since 2001. It has had a very good run. We had about 17 years of solid profitability. One of those technology companies that pays dividends has no debt and is extremely healthy. It has a solid financial foundation. It has never borrowed money ever since we went public and is developing some exciting new technologies.

SH: Can you update our investor audience and your shareholders on any recent news and new operational developments, especially in the wake of the COVID-19 pandemic?

LK: Well, as you know, we've republished our financials for last year and they certainly were just as bad as almost everybody else's. Despite of that, that we lost maybe under a hundred thousand dollars in 2020, the company's cash position has slightly improved. The dividends are kept going and kept being paid. And we have also had a phenomenal run towards the end of the year, which will be reflected in the first quarter, as we announced a large sale to a Japanese company of a hundred of our men packs, which are the latest, greatest portable antennas that we have developed that can be packed into a backpack and deployed within five minutes and without any tools. They are able to locate the satellite within 30 seconds and deliver a high-speed broadband internet to anybody who needs it on the move on for all types of applications. As you mentioned in your opening statement,

SH: Dr. Klein, for those who are new to this kind of communications technology investment, what are some of the advantages to your comm-tech play?

Click to enlargeLK: Would they advantages that we have over the regular type of telecommunication services that are being provided is that there is a lot of places in the world where there is no infrastructure and no communication available of any kind. So the only way to reach that is over a satellite. The other aspect of the technology is that if you want to set up a satellite antenna, normally you need a satellite engineer. And sometimes it takes up to an hour or longer to align up an antenna to a particular satellite, to set it up. We have developed a robotic platform and a lot of technology that can do this as at a press of a button. So you can have the antenna on top of a vehicle and drive it to the middle of the Sahara Desert, push a button. And within two minutes, you are connected to your satellite provider and you have internet connection and all the other internet features that you enjoy in downtown Toronto or downtown Vancouver.

And with another press of a button you can have the antenna fold drive away and repeat. So we have oil and gas companies and a lot of people in the world, we are in 106 countries. And they use the system to deliver a high-speed internet in many, many vertical markets, as you mentioned. And the beauty of it is that it is a totally satellite knowledge free system. So you don't need to know anything about satellites, all you need to know is how to press a button and you are able to connect to the satellite. So it's a huge advantage to a lot of companies that need instant communication in case of a disaster, in case the of a hospital with an emergency situation or in case of a hurricane like there was in Japan, there was a massive disaster at Fukushima where we sold 400 antennas to replace 400 cell towers that were down. And we're able to come back up with the help of our antennas within a couple of weeks.

SH: As I briefly mentioned in the intro, C-COM’s flagship product is eye-Net-Vu – a commercial mobile V-SAT system. What are its main applications and how exactly does it work?

LK: Well, as I just described, the main applications are disaster management, military applications, fire departments use them in New Zealand. For example, every fire truck has one of our antennas on it. And the reason for it is that it provides life-saving communication in many emergency situations. It also, as I mentioned, replaced cell towers in case of a disaster where it becomes a cellular back haul a solution it has a really unlimited type of applications because as you can see, internet is everywhere. It's used everywhere in the world. And the communications in many instances are absolutely essential. So our antennas make it possible to deliver those types of communications where there's no terrestrial communication available or where there's not enough bandwidth available. So television stations, for example, broadcasting immediately from a location where you can go out with a press of a button, get the antenna up and then stream video into your studio. And then when you finish push a button, have the antenna fold automatically and drive away. So it is an extremely useful vertical market that you're addressing with this technology.

SH: When you say the company is “developing highly disruptive antenna technology” what exactly does this mean?

LK: Well, as you know, most of the antennas today are they are elliptical, fairly large, and they use they're used on geostationary satellites. Probably everybody has heard now space X and Amazon and Facebook, and many others who are growing Telesat in Canada, who are developing a new type of a satellite called a Leo or low earth orbit satellite, which will consist of many thousands of satellites in the case of SpaceX, I think it's 40,000 and they will be covering the whole earth and flying around in different locations, different directions, and the existing technology of parabolic antennas that sit in one location and only look out for one satellite is no longer sufficient. So you need an antenna that will be able to track these many thousands of flying objects in the sky and be able to transmit and receive to them while stationary, and also while in full motion.

So you have the satellites in motion, and you also have a vehicle in motion or an aircraft in motion or a ship in motion. And those will need an antenna that can electronically scan the sky and connect to these satellites and deliver high speed internet to, and from these satellites. And in order to do that, you need a completely different technology than what we have today. And this is called the electronically steered phased array antenna, which really is like a printed circuit board with no moving parts and all of the magic of connecting to the satellite and tracking the motion of the satellites and tracking the motion of the vehicle with the satellite is all built into this electronic antenna that is conformable also, which means that you can put it on a fuselage of an aircraft. You can build different shapes and sizes from it, and you can build them as large or as small as you require for the bandwidth that you intend to operate on.

So this is a technology that C-COM has been developing with the university of Waterloo for the past four years. And we are presently in the process of testing this antenna over a live satellite to make sure that the technology works. And we expect to have a large business opportunity coming from this, because this is the future of telecommunication of satellite communication and some large players like Elon Musk and many others including TeleSAT are putting billions of dollars into this technology and putting up tens of thousands of satellites to provide these types of services and C-COM hopefully will benefit being the ground station player, being on the ground, being able to deliver connectivity using this type of electronically steered antennas to these lower orbit satellite.

SH: How will you keep this technology sustainable and profitable in the long term?

LK: Well, it's a very good question, Dave. Sustainable will be something that we will need to constantly improve and work on. So C-COM is not only developing the antenna itself, but also developing the integrated circuits that sit below the antenna itself that make this magic happen. And so that's one way to keep control of the technology. And you are relying on the technology that you are developing yourself. And so we have a very large team at the university of Waterloo and thanks to the Government of Canada funding of this team over the last four years, we are developing this technology with there's a tremendous knowledge base of people who have been also involved in the Blackberry development project. So, we believe that the technology that we are developing will be revolutionary and will expand to many other market areas, not only to satellite, but also 5G, 6G, drones and other vertical markets that will require the amount of bandwidth. These Leo satellites will be delivering over time.

SH: For our investor audience, how does the company generate revenue and where’s the large-scale market growth in the industry?

LK: Well, presently the company's revenue generating revenues from our installed base of 8,500 antenna systems in 106 countries. And the revenue basis is coming from a reseller base. We only sell to resellers. And so we have over 600 resellers in these countries. We build about 700 or 800 antennas existing on the pause antennas a year in which we sell all over the world on a regular basis. And the product has been extremely well received and reliable and has been in the market for about 17 years. And it's all over the world, as I mentioned in practically every continent of the world. And so we are developing new technologies on all of this type of antenna also, but the big market ultimately will come from the phased-array antenna systems because some of your listeners may know that there's over three and a half billion people on the planet who have no access to any communication whatsoever.

And it's very unlikely that they will have fiber or any other type of terrestrial type of communication anytime soon. So satellite will be the only solution for them. And we believe that the commercial market of these satellites, including cars, planes, boats, trains will all require connectivity all the time. And the only way to do that will be with these electronically steered antennas that will make it possible to connect to these low earth orbit satellites that will be working in conjunction with any third terrestrial networks that will be out there as well. So the market for worldwide connectivity of this type of technology will be astronomical.

SH: Value and opportunity are catchphrases that really get the attention of savvy investors? What can you tell them that makes your business model so intriguing and attractive?

LK: Well, what I can tell them is that if they look at our past history the company, as I mentioned before, has been around for 24 years, 17 of those years have been profitable. We paid out about 17 about $16 million in dividends. The company has over $22 million of working capital. The, the share price is still extremely attractive. It's, it's very, very low compared to some other companies that are not doing as well and losing money. We, we, we tend to generate a lot of cash. We give it back to our shareholders in terms of dividends. And I believe that this new technology that's coming around the corner will, will transform the company to a totally different company that we are today, because we will be developing something revolutionary that everybody in the world will be looking for.

SH: As you just mentioned, C-COM has paid over $16 million in dividends to date – something we don’t always see with small caps. What’s the ‘formula’ to profitability here, Dr. Klein?

LK: The formula is to stay small. Everything is outsourced. We don't have a manufacturing facility. We do we work, we have designers in-house and we have salespeople in house, but we, everything is outsourced. So we keep the company extremely lean and extremely efficient. And even the research is outsourced to the university of Waterloo. So something of this nature would, would involve tens if not hundreds of millions, of dollars of investment and the companies that try that have gone under. So our, our philosophy and our approach is to keep the company small, keep it efficient, outsource, whatever you can, and make a decent amount of margin on everything that you sell. And it seems to have been working for us so far, and I expect that it will continue to, to do so.

SH: It would be remiss of me not to mention your stock has had a bit of a roller coaster ride over the past year…but you’ve still more than doubled it since May 2020. What can you tell our investor audience regarding the current valuation of your stock and why you think it’s still a good buy right now?

LK: Well, I think the stock is still not taking into consideration the potential upside or the electronic we steered antenna and the potentially enormous market for, for that it's only being rewarding us for what we have done in the past and how well we are doing. I think that the, the, the, the, the future is where the stock value hopefully will appreciate dramatically. Once we are able to demonstrate this new technology and delivered delivery to customers, as I mentioned, the market for this is, is, is very, very large. And there are some players that, that, that are in the market, but it's a very difficult market to access. And the type of technology that we are developing is one notch above the technology that others are developing. In other words, we are developing a very difficult market, which is a K band, which is a very high frequency market, which delivers 10 times more bandwidth than the KU band market that many of the existing competitors are looking at. So we have decided to tackle the most difficult part of this technology and develop the, the product for this technology, which we believe will be a winner down the road and will be the one that everybody will migrate to.

SH: Can you tell our audience a little bit about your corporate management team at C-COM along with the experience and innovative ideas they bring to this technology space?

LK: So the company was started by myself and our chief technology officer of Bilal Awada, who is a master's degree in engineering and communications. Our CFO is a part-time CFO, who worked for a number of companies. His name is Art Slaughter. We have a number of people who have been with us for over 20 years in sales and development of the product technology. And so the team is relatively small, as I said, it's about 30 people. The other four people that we have are working out of the university of Waterloo, and they are PhDs and postdocs, and they are involved in the chip design and also in the layout of the technology and the communication technology, they are developing the antenna. So there's a whole large team there. Only few of them are actually C-COM employees. The rest of them are involved with the university.

SH: Thank you again for your time today, Dr. Klein. Anything further to add that I may have overlooked?

LK: Thank you. I think you covered it pretty much. And I hope that I communicated the right message to your viewers, who hopefully can become C-COM shareholders. And hopefully they will appreciate the stock valuation much the same way as those who have invested in the company 5-10 years ago. And they still hold the shares. The other thing that I would like to add that I am one of the largest shareholders in the company, which always helps to assure a shareholders that the president and CEO owns about 40% of the company. And I've never sold a share because I believe that the rewards are coming later down the road.

For more information, visit www.c-comsat.com.


FULL DISCLOSURE: This is a paid article produced by Stockhouse Publishing.


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