Com Dev sees strong sales growth in 2001
- Com Dev International <CDV.TO> said on Thursday that strong growth in its satellite division should result in 50 percent revenue growth in 2001, and analyst earnings forecasts are achievable if a partner is found to share development costs for its new wireless product.
"We are looking for 50 percent top-line (revenue) growth for next year," said Com Dev's chief executive Keith Ainsworth at a lunch for financial analysts in Toronto.
The company's space division, which makes filters, antennas, and amplifiers for satellites will benefit from an Asian recovery, larger satellites and a current backlog that is the largest in the company's history, said Ainsworth.
But Ainsworth cautioned that "heavy" research and development spending on the firm's high-speed mobile Internet product M/ERGY could hamper Com Dev's ability to achieve analyst earnings forecasts in 2001.
One analyst polled by First Call/Thomson Financial expects Com Dev to earn 35 Canadian cents a share in 2001.
"We still have to achieve partial funding for M/ERGY...we need early adopters or funders for M/ERGY to achieve forecasts," added Ainsworth.
M/ERGY has raised investors' eyebrows in the past few months with its claims of achieving high-speed Internet access while users travel at over 160 kilometres per hour (100 mph), and at a deployment cost of one-quarter to one-eighth of a current network.
A typical digital cellphone is unable to maintain a connection at high speeds because the signal drops when it has to transfer from one base station to another.
Also, Com Dev signed a technology transfer agreement with Qualcomm for M/ERGY that saw the digital wireless developer make an equity investment in Com Dev.
Excitement over M/ERGY has seen the company's shares triple since July despite a weak market for technology stocks. On Thursday the shares closed down 90 Canadian cents at C$18.65 on the Toronto Stock Exchange.
But at a current trading valuation of 46 times price to earnings the shares are expensive despite the strengthening of Com Dev's fundamentals, one Toronto buy-side analyst told Reuters.
Ainsworth said gross margins for the firms' satellite division are expected to "steadily improve" from the 30 percent plus range, while margins for the wireless division are expected to hit the mid 20 percent range.
Furthermore, a "huge opportunity" is developing in the Chinese marketplace where Com Dev's wireless manufacturing plant will soon run at three shifts, and should be at a C$40 million ($26 million) annual production rate by January, added Ainsworth.
Two of Com Dev's Chinese customers Huawei and ZTE, which Ainsworth described as the Chinese equivalents of Nortel Networks Corp., will become the dominant builders of a 250 city GSM overlay cellular network in China next year.
The Chinese government has mandated that 40 percent of the equipment that is used in these new networks be sourced locally, which bodes well for Com Dev.
"There is a huge opportunity (for ZTE and Huawei). We are now a domestic employer in China so we are positioned to be a supplier for this inter-city mobile system," said Ainsworth.
($1=$1.54 Canadian)
16:39 11-23-00 |
