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Beam Communications Holdings Limited (ASX: BCC) is one of the world’s leading designers and manufacturers of advanced satellite communication equipment with its sales spread across more than 30 core products in multiple countries and counts leading global clients like Telstra, Iridium, Inmarsat, KDDI and Thuraya.
The resilience in the base business can be seen through Beam’s positive net profit over the last three halves including the first half of FY2020 (1H FY20). FY2020 has been a transition year for the Group with new product launches that are expected to deliver further earnings momentum in FY2021 and beyond.
The Group remained profitable during 1H FY20, even though it didn’t get a follow-up order for the Thuraya WE dual-band hotspot device that had bolstered the 1H FY19 results. For 1H FY20, Beam recorded interim revenue of $ 7.1 million and a net profit of $ 160,538.
Source: Investor Update March 2020
Over the last 20 years, Beam has developed many world’s first products for key niche markets, clearly establishing a track record of innovation. For Beam, significant and continued growth in other products reduces its earnings variability. This gives the Company a reasonably stable base business on which to launch new products like ZOLEO, which could lead to a big step change in its earnings profile as the device will generate recurring revenues through the sale of airtime.
Launching New Products
- ZOLEO Gaining Market Traction
The real growth driver for Beam is ZOLEO. The device gives smartphone users the ability to message anyone from anywhere on earth as it uses the upgraded US$3 billion Iridium satellite network.
In late-February 2020, Beam signed an agreement to retail ZOLEO through LiTMUS LAB at Myer’s flagship stores including Myer’s Sydney CBD store from 1st March followed by Myer Chadstone in Melbourne a few weeks later and subsequently at Myer Brisbane by 1 May 2020.
LiTMUS LAB is a shop-in-shop concept store, enabling customers to interact with cutting edge products from around the world and then make a purchase. Every month, over 2,000,000 shoppers visit LiTMUS LAB.
The device will also be sold through the Myer website, which has a consumer traffic of over a million every month. Furthermore, ZOLEO is expected to be available on Amazon and eBay from 4QFY20.
Given these established sales channels and the fact that there are around 200,000 active satellite phone subscribers in Australia, achieving a good traction for ZOLEO subscribers over the next few years shouldn’t be too big a task for Beam – especially given its low price point of $ 345 with monthly plans ranging from $ 32 to $ 80.
ZOLEO’s recurring sales to translate into profitability: ZOLEO allows for seamless switching between Wi-Fi, mobile and satellite while providing a familiar smartphone messaging experience and ease of access to the phone’s contacts. Key features of the device include water resistance to IP68 (submergible up to 1.5m of water for 30 minutes), location (GPS) sharing and DarkSkyTM weather forecasts. It has a battery life of up to 200 hours and a dedicated 24/7 SOS button.
Considering the sticky customer base and competitive pricing of this device, the sales should directly translate into the Company’s operating profits even after considering a modest margin and conservative adoption rate.
- 4G IoT routers
With respect to selling Beam’s Telstra-approved 4G IoT routers, the company executed a separate agreement with Leading Edge, which has a network of more than 950 independent retailers across Australia. Besides, a majority of Leading Edge’s retail partners are located in regional Australia and the two parties are in talks to retail ZOLEO as well. As per Beam, regional consumers are a key market for the ubiquitous satellite messaging solution.
- Upcoming Iridium Certus Devices
Beam Communications will be launching its new Iridium Certus devices in FY21. Iridium has invested over US$ 3 billion in establishing its next-gen satellite constellation and Beam will be one of the world’s first Iridium partners to launch next generation devices using the new Iridium Certus 9770 transceiver which has a data speed of 35 times faster than previous transceiver. The new Beam devices would be very competitive with high-quality voice, messaging and seamless access to basic applications.
Promising Road Ahead
- Continuing growth in SPS and Beam-branded businesses in 2HFY20
- ZOLEO to generate material recurring revenue towards end of FY21
- Improving affordability of mobile satellite devices boosting global demand
Source: Investor Update March 2020
Also, in light of the present worries around the impact of coronavirus (COVID-19), Beam Communications reassured the existing and prospective shareholders that it holds at its, Melbourne warehouse, sufficient inventory of core BEAM branded products supplied out of China, including Iridium GO! product held at Iridium. Besides, ZOLEO device is manufactured in a highly automated and state-of-the-art facility in Malaysia with 5000 units either on hand or in transit to customers.
Stock Information: The BCC stock is currently priced at $ 0.255 as of 5 March 2020 with a market cap of ~ $ 13.22 million. The stock has generated positive returns of 25% in the last six months and 13% in the last three months.
