I still hold my original position in the old InStep and now I am quite pleased to see the brokerage community step up and give this deal the respect it has certainly earned. Here is the report.
MORNING MEETING NOTES OCTOBER 15, 1999
TECHNOLOGY
EDISPATCH.COM WIRELESS DATA INC. (EWD - $1.82, VSE)
RECOMMENDATION: STRONG BUY 12-MONTH TARGET PRICE: $6.00
Sprott Initiates Coverage of eDispatch.com Wireless Data Inc.
We are initiating coverage of eDispatch.com Wireless Data Inc. (eDispatch), with a Strong Buy
recommendation and a 12-month target price of $6.00. The Company develops, markets, and licenses
software applications, including Internet dispatch software to wireless carriers, for use in cell phones, two-way
pagers and other handheld devices.
The Company recently signed its first major deal with a large wireless operator in the southeastern US
known as Southern LINC., a division of the Southern Company (NYSE:SO), the largest electric utility in
the US. The contract is expected to contribute over $3 million in revenues between 1999 and 2000 and to
grow to almost $6 million in f2001, via a potential subscriber base of over 160,000 existing customers (as
of September 7, 1999) mostly in the transportation, health care, utilities, field service and repair sectors.
The eDispatch software will be marketed to Southern's subscribers starting in Q4/99 and will generate
about $500 per subscriber, per year, in license fees for EWD. eDispatch's software is bundled with other
software from Phone.com (PHCM-Q), Data on Air and Cerulean Technology, and marketed as
“Informance Solutions”, a package of wireless data and Internet services. We anticipate similar
agreements of this size with other major US carriers in the next three to six months. These contracts are
expected to drive growth from a nominal revenue base in 1999 to revenues of almost
$5 million in 2000 (October), and to almost $20 million in 2001 (based on the Southern Linc contract and
one or two other contracts to be secured).
The following table highlights our forecasts for the Company going forward:
Dec. 31 ($000) 1998A 1999E 2000E 2001E
Revenues $373 $400 $4,583 $17,600
Net Income $(752) $(2,623) $(315) $3,717
EPS - basic $(0.06) $(0.19) $(0.02) $0.24
EPS - fully diluted $(0.06) $(0.19) $(0.02) $0.20
The Company's wireless Internet dispatching and delivery software allows companies to communicate and
exchange information with workers in real time, while also automating the workforce management process
via public wireless data and cellular networks. The solution is initially geared to the Motorola iDEN
family of cell phones (for Southern), CDPD and CDMA, but will be expanded to include other leading
wireless platforms including DataTac, Mobitex, TDMA and GSM over the next twelve months. We
believe that this opens the door for the Company to secure business with numerous other carriers, including
Clearnet, Nextel, GTE, Bell Atlantic Mobile, Sprint, Bell Mobility, AT&T Wireless, Microcell, Vodafone
AirTouch, American Mobile Satellite, Bell South Wireless and Cantel in North America alone. The
Company's software is platform independent, working on a wide range of wireless technologies and device
operating systems. eDispatch launched its first pilot project in April 1998 with BC Tel Mobility, using a
CDPD platform.
Evidence of the explosive nature of this market is increasingly prevalent. At this week's Telecom 99
conference in Geneva, the largest telecom conference of the year, smart phones and wireless internet via cell
phones were the clear highlight of the show, with a flood of announcements and new initiatives. This
excitement has spilled over into the business press, with prominent exposure in many of the leading
newsletters and newspapers (including yesterday's Wall Street Journal). Other meaningful developments
include the recent US nationwide rollout of the wirelessly enabled Palm VII from 3Com and the
introduction of the impressive internet enabled Neopoint 1000 cellphone by carriers like Sprint PCS and
others, which have created significant momentum for this market.
Operationally, eDispatch is run by Brian Ellis, formerly Vice President of Sales and Marketing at TIR
Systems and before that a senior manager at MPR Teltech (a subsidiary of BC Tel), who was brought in to
run the Company early in 1998 and inherited the VSE listing at that time. eDispatch was originally
founded in 1991 and was known as InStep Mobile Communications Inc. at that time, before bringing in
new management and changing its name in 1998. Many of the key employees at the Company have worked
at Motorola (MOT-Q) or MDSI Mobile (MDSI-Q).
eDispatch's products integrate the Internet and wireless data, two of the hottest growth markets in the entire
tech sector. This point was reinforced earlier this year, when Phone.com went public on the Nasdaq. The
Company has leading Internet browser technology for cellular phones and handheld devices and trades at a
market capitalization of US$6.7 billion on revenues of US$13.4 million.
Based on these factors, and the growth opportunities that are available for eDispatch, we are
recommending the stock as a Strong Buy with a 12-month target of $6.00 based on 30x 2001 earnings and
5x 2001 revenues. This target could be conservative given the potential of the market, but is reasonable
given the early nature of the Company and the market, and the lack of a TSE listing.
EPS (YE Dec. 31): 1998A - $(0.06), 1999E - $(0.19), 2000E - $(0.02), 2001E - $0.20
Shares Outstanding: Basic - 15.2 MM, Float - 12.7 MM Public Float: $23.1 MM
Barry Richards (416) 943-6428
Happy hunting and good luck picking up more of the cheap paper on the dips. Cheers ontopequity.com |
