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4
AirIQ is building for a takeover (of itself)
Posted by: Gerry Wimmer
3/4/2018
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TOP IDEAS: A telematics industry player and current shareholder could make a bid to buy the remainder of AirIQ Inc. (TSXV: IQ) as revenues and cash-flow continue to grow.



Since Investorfile first recommended AirIQ Inc. (TSXV: IQ – C$0.17) as one of its Top Ideas (See: AirIQ is a technology company small in size but the stock is big in value), the stock is up 112% in value. While the investment returns to date are good, the stock is still a "sleeper.”

But that may change.

AirIQ Inc. (TSXV: IQ – C$0.17) operates in the growing telematics industry and for 20 years the Company has been providing Global Positioning Service (GPS) solutions to customers throughout North America. With its intuitive web-based platform, AirIQ utilizes GPS devices to provide fleet operators and vehicle owners with a suite of asset management solutions to reduce cost, improve efficiency and monitor, manage and protect their assets. Services are available online or via a mobile app and include: instant vehicle locating, boundary notification, automated inventory and maintenance reports, security alerts, electronic logging and vehicle disabling and unauthorized movement alerts.

During the last two years the industry has been undergoing change as most GPS solution providers for mobile assets have had to make the transition with their customers from 2G to 3G service network, thus the termination of legacy 2G GPS units and airtime contracts. AirIQ undertook the task of proactively completing the 2G to 3G transition for its current customer base, which caused revenue growth to be flat last year. But today the Company’s focus is on growing its recurring revenue base.

Through the first nine months of fiscal 2018, AirIQ’s operations are trending very positively. Recurring revenues, which represented 68% of the $820,000 in total revenues generated in Q3, are growing consistently. So is operating cash flows, which have improved significantly, up 155% to $196,000 in the same quarterly period. Thus, cash on hand has also increased by $307,000 from $132,000 as of March 31, 2017 to $439,000 as at December 31, 2017, which is net of the acquisition of Connected Telematics. AirIQ has no debt.

Barely reflected in fiscal 2018 Q3 results (which ended December 31, 2017) is the Company’s recent acquisition of the assets of Connected Telematics Corp., a privately held Canadian wireless fleet management firm. This transaction closed on December 7, 2017.The purchased assets included customer contracts, generating approximately $500,000 in annual recurring service revenues. This acquisition is expected to be accretive to AirIQ’s overall earnings beginning in fiscal Q4, which ends on March 31.

As we expect the Company’s financial results to continue to build, Investorfile is intrigued that Vecima Networks Inc. (TSX: VCM) has recently acquired a 21.3 per cent ownership position in AirIQ. Vecima Networks is a cash-rich operation that has a telematics division operating under the Contigo, Nero Global Tracking and FleetLynx brands.

From the script of a recent Vecima investor conference call, we assert that its investment in AirIQ may not be passive. The Vecima Networks CEO was quoted as saying that:

"The telematics market is in a secular rollout phase..."

"A lot of opportunity for potential scale-out through M&A, and that remains of interest to us to build scale...”

"AirIQ is an organization we've been tracking for some time, a 20-year-old Canadian company, we own 21% now. And we've been following the company for some time and see them do some good work, growing revenue modestly, cash flow. And they even made a recent acquisition, so they built up their base a little bit. So we're continuing to observe that and monitor that. We'll engage with the management and understand the business at much more depth and take it from there in terms of what the next step may be.”

Based on the foregoing, we conclude this post by reiterating our long standing recommendation that small cap investors should continue to accumulate the shares of AirIQ up to a price of C$0.20. That said, we also speculate that there could be a liquidity event some time in 2018 with Vecima making a takeover bid to acquire 100% ownership of AirIQ. Under this scenario, we believe AirIQ stock will command a minimum value of $0.25 per share (but hopefully higher), which implies around a 50% upside (at least) from its current trading levels.

AirIQ has approximately 28.9 million shares outstanding.

The Company's website: www.airiq.com

Author's share ownership disclosure: IQ - Yes


Read Disclaimer:

This 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.

Investorfile.com 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.

The author of this article has acquired and may trade shares of AirIQ Inc. through open market transactions and for investment purposes only.

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Comments:
Posted by: Gerry Wimmer
Hi, Thanks for the update. It''''s definitely a great analysis. AirIQ is definitely under my radar now. May I ask what is your thought about the resignation of the director to AirIQ yesterday? Thanks! This Director resignation was expected. Gerry
Posted by: Lawrance
Hi, Thanks for the update. It''s definitely a great analysis. AirIQ is definitely under my radar now. May I ask what is your thought about the resignation of the director to AirIQ yesterday? Thanks!

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Hi Gerry, Your philosophy is focused on principles that have been shown to produce above average results over time and your record has clearly proven that. Congratulations on a great blog and thank you for the hard work that you do in sharing and updating your ideas; it is much appreciated.