Ubisense: A Quick Look
Edison | Apr 24, 2013 03:26PM ET
Ubisense’s recently launched Smart Factory System (SFS) is an upgraded version of the RTLS software platform, offering easier configurability and faster implementation for high-value manufacturing customers. While today’s major Geospatial contract with General Electric (GE) is predominantly for the division’s traditional systems integration work, Geospatial’s myWorld software is winning business from existing and new customers and even attracting interest from the RTLS customer base.
Contract Win In Geospatial
The company announced a major contract win with GE, worth $6.8m over three years, to provide location services as part of a major engagement. We assume this is a GE Smallworld implementation contract, providing support to our Geospatial revenue forecasts.
Technology Update
We recently visited the company for a technology update. The RTLS software platform has been redesigned and rebranded as Smart Factory System. It should provide a more modular and configurable solution for manufacturers, with comprehensive coverage of all manufacturing processes and requiring less time and expense to implement. In the Geospatial division, the myWorld software application is proving popular with new and existing customers, as well as acting as a bridge between the RTLS and Geospatial divisions.
Changes To Estimates
Post our company visit we have made changes to estimates below the EBITDA line. Factoring in usage of the credit facility and higher amortisation of capitalised development costs in FY14 reduces FY13 EPS from 2.42p to 2.20p and FY14 from 4.57p to 2.67p. We assume improved working capital management, resulting in net cash of £2.6m at the end of FY13 (up from £1.8m).
Valuation: RTLS Adoption The Key To Upside
In our view, the market is valuing Ubisense’s two businesses in line with their relevant markets on an EV/sales basis. Key to driving upside will be evidence that the RTLS business is winning contracts with new and existing customers and, hence, growing faster than the market. We believe this is possible considering the size of the available market, and could drive the share price above 247p.
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