IDEAS: Once a bigger company that lost money, AirIQ Inc. (TSXV: IQ) is now
making money and the stock is a value buy for small cap investors.
Inc. (TSXV: IQ - $0.08) was once a much bigger company with over $30 million in
sales. But after years of losing money and adding debt, bad acquisitions and
massive equity dilution, the stock ended up trading for pennies. Today each
share of AirIQ still trades for pennies, eight to be exact. What is the
difference? Now eight cents buys you
stock in a Company that has consolidated its shares, debt free and has a new
CEO operating AirIQ to earn profits.
in Pickering, Ontario,
AirIQ has been providing Global Positioning Service (GPS) solutions for over 15
years to customers throughout North America.
The Company offers a suite of asset management services, end-to-end wireless
solutions, which allows operators for fleets of delivery trucks, service
vehicles and rental or company cars the ability to monitor, manage and protect
their mobile assets on a simple and cost-effective basis. Services include:
real-time instant vehicle locating, boundary notification, automated inventory
reports, maintenance reminders, security alerts and vehicle disabling and
unauthorized movement alerts.
hardware products are designed for the physical environment of a variety of
fixed or mobile assets and are typically installed in a stealth location in the
body of the asset. The Company's hardware device enables tracking and
communication using satellite (GPS) technology, digitized mapping and the
Internet. The hardware devices provide the user with information and control
messages to and from the asset via AirIQ's Online™ system. Users can access their asset information via
an Internet browser, complete with maps and detailed location information.
earns the majority of its revenues from the sale of GPS hardware devices
installed on mobile assets and from the wireless airtime fees for communication
from the hardware devices (that yield recurring revenues for each device
deployed) using satellite (GPS) technology. Last quarter approximately 70% of
AirIQ's total revenues are recurring from the Company's airtime customers, most
supported by two to three-year term service contracts, including month-to-month
airtime customers. The Company has a variety of customers located in both the USA and Canada. No one customer accounts
for over 10% of total revenues.
the years, AirIQ's has built up strong goodwill in this marketplace. The Company's
longevity is primarily due to its superior customer support services.
the last 12-months, AirIQ's revenue base grew to over $3 million while
earning on average 60% gross margins. But, more importantly, during this same
12-month period the Company had generated $450,000 (15% of revenues) of
Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA) and
$297,000 of net income. In the Company's most recent quarter (Q2 of fiscal
2016), AirIQ earned $0.01 per share in earnings. The Company also has a good
balance sheet with some cash in the bank and no debt.
AirIQ is a very small company operating in the competitive GPS industry. It is
also the smallest company that the Investorfile blog has undertaken to cover as
one of its Top Ideas. But the new CEO of AirIQ has demonstrated that they can
grow this business profitably, even on a modest revenue base. We recognize this
financial achievement and speculate there will be more profits as the Company's
revenues continue to grow.
shares of AirIQ trade today at a valuation that is under five times Enterprise
Value (EV) /EBITDA, less than 10 times earnings and only at 70% of its revenues,
based on the Company's 12-month trailing financial results. By all of these
metrics the stock, which is currently trading at $0.08, is very inexpensive.
forward we believe that within the next 12 to 18 months this Company can reach
a quarterly revenue run-rate of $1 million or $4 million annually while earning
20% EBITDA margins, totaling $800,000 within a 12-month period. Under this
scenario we recommend that small cap investors should accumulate the shares of
AirIQ up to a price of $0.20. At $0.20, the shares would still not be
overvalued trading at less than 7-times Enterprise Value (EV) /EBITDA based on
the Company's current capital structure.
stock accumulation target of $0.20 does not include the possibility of
shareholder value-enhancing events. We note the GPS asset management industry
is undergoing some consolidation through merger and acquisition activity. AirIQ
would be an accretive acquisition for a larger Company. Therefore the potential
upside for this stock is much higher than $0.20.
note: Mosaic Capital Partners LP owns over 18% of AirIQ's outstanding shares
and management and directors combined own another 30% of the Company's shares.
has approximately 28.9 million shares outstanding.
Company's website: www.airiq.com
share ownership disclosure: IQ - Yes
article is for informational purposes only. This article is based on the
author's independent analysis and judgment and does not guarantee the
information's accuracy or completeness. The information contained in this
article is subject to change without notice, and the author assumes no
responsibility to update the information contained in this article. The
information contained within this article should not be construed as offering
of investment advice. Those seeking direct investment advice, should consult a
qualified, registered, investment professional. This is not a direct or implied
solicitation to buy or sell securities. Readers are advised to conduct their
own due diligence prior to considering buying or selling any stock.
is not engaged in an investor relations agreement with AirIQ Inc. nor has it received any compensation from AirIQ Inc. the preparation or distribution of this article.
author of this article has acquired and may trade shares of AirIQ Inc. through open market transactions and for investment purposes