- 5G networks expected to roll out in 2019
- Around $150 billion expected in Telco CAPEX by 2023
- Spectrum’s opportunity pipeline valued at $137 million
On December 19, 2018, an investor webinar and live Q&A session put on by Spectrum Global Solutions, Inc. (OTC: SGSI) showcased the engineering company’s technological prowess and potential (http://ibn.fm/piEao). Undoubtedly, this single-source provider has the capability to upgrade, install and maintain next-generation telecommunication networks. Deployment of 5G networks is expected to create roughly three million American jobs and add $0.5 trillion to U.S. GDP, according to global management consultants Accenture. Spectrum plans to be part of that rollout. The company has developed a global track record by successfully executing over 150,000 projects since commencing operations 34 years ago. Spectrum has delivered cost-effective, scalable, robust solutions for communication carriers, utilities, enterprise companies, OEMs and others. With 5G on the horizon, the company is gearing up to continue its stellar performance. With $137 million in the opportunity pipeline, its stock, trading at just 7.5 percent of sales, looks strangely undervalued.
A generation ago, 2G networks were state-of-the-art. Very few people had mobile phones back then. In 1991, when 2G had its debut, cell phone subscriptions numbered about 7.5 million. Subscriptions hit 69.2 million in 1998, when 3G appeared, and reached 262.7 million in 2008, after the launch of 4G LTE. Now, with 5G set for rollout in 2019, very few on the planet will not be linked to a network. Already, major carriers like AT&T and Verizon have launched 5G service in certain markets. Others are sure to follow. Around $150 billion in telecom capital expenditures (CAPEX) is expected through 2023. 5G networks deliver more data at greater speeds, more responsiveness by lowering latency and the capability to connect a lot more devices at once (think sensors and smart devices), which augurs well for the Internet of Things (IoT).
Spectrum’s client list reads like a who’s who of telecom celebrity. It includes major carriers like AT&T, Sprint, T-Mobile and Verizon; aggregators (essentially infrastructure leasers) such as American Tower, Crown Castle and ExteNet; and big name OEMs like Ericsson, Nokia and Samsung. With a foot in so many doors, that $137 million in the opportunity pipeline looks likely to boost Spectrum’s revenues in the years to come. The company’s embedded relationships generate repeat business at minimal acquisition cost. As the shift to 5G progresses, analysts expect “the five largest telcos alone… to spend approximately $50 billion on CAPEX in 2018, up from nearly $45 billion in 2017.”
Spectrum has beefed up resources to prepare for a 5G future. Earlier this year, it announced the acquisition of ADEX Corporation, an Alpharetta, Georgia-based company, and ADEX Puerto Rico LLC, which offers turnkey wireless and wireline telecom services and project professional services (http://ibn.fm/z1Off). ADEX, which has operations nationwide and in the Caribbean, has supported telecommunications companies for the last 25 years throughout the project lifecycle of existing and next generation network deployments, both domestically and internationally. ADEX is now a big part of the Spectrum family. It is expected to provide about two-thirds of Spectrum’s 2018 projected revenues of $33 million.
Despite this promise, Spectrum’s virtues, it seems, have escaped the public eye. Spectrum is a proven market operator with clear, quantifiable organic growth opportunities in a fast growing market segment; it’s led by an experienced management team. It is also unique as one of only a handful of engineering and installation companies able to provide all services and bundle products for telcos. The company is registered in 49 U.S. states, three U.S. territories and six Canadian provinces.
However, even with its impressive investment credentials, SGSI stock is trading at 7.5 percent of sales, making its market cap around $2 million (http://ibn.fm/UmINw). Trading at just 1x its estimated 2018 revenues would put the company at a $32 million market cap, more than 15 times where it is today. For a company generating double and/or triple-digit growth, 1x sales is an extremely conservative valuation. Maybe it’s time for investors to take another look at Spectrum Global Solutions.
For more information, visit the company’s website at www.SpectrumGlobalSolutions.com
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