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
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
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
"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
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