Fund Manager Cleland Reinforces Upside in Real Time Black Box Providers
CANADA / ACCESSWIRE / May 13, 2014 / Two months after the disappearance of Malaysia Airlines flight MH370 - the location of the plane and its 239 passengers and crew is still unknown.
Although numerous "Phone-finder" apps exist that can track your cell phone reliably within 10 feet - the combined brain-trust of the international aviation community has so far been unable to locate a 545,000 pound metal object.
Current "Black Box Technology" is pre-internet - so vulnerable to communications mishaps that it’s like attaching a message to a carrier pigeon. It seems certain that public outrage will catalyse long-overdue changes in the way the airplane data is recorded and tracked.
Hugh Cleland, CEO of Roadmap Capital, has joined a chorus of research analysts in shining light on small company called FLYHT Aerospace Solution (FLY-TSX.V) which has developed an emergency data streaming technology called "FLYHTStream". This technology sends critical data to ground-based operations using the Iridium satellite network through Iridium Communications (NASDAQ:IRDM).
"Recent events have reinforced my expectation that FLY will be in the $1-$3 range within 3 years [200%-600% higher than current valuation]," states Cleland in an April 2014 letter to his investors.
Inmarsat’s (ISAT-LSE) recent offer to transmit GPS location data every 15 minutes for free is not expected to compete with FLY’s instantaneous stream of aviation data points including: location, altitude, airspeed, pitch, roll, yaw, engine performance metrics and airframe indicators.
"It is a bitter pill to swallow that it took a tragedy as devastating as the disappearance of Malaysian Airlines Flight 370 to catalyze the events that will transpire over the coming 1-12 months," states Cleland, "Airbus/L-3 and FLYHT are the only companies which have a fully approved system. I have never been happier that the barriers to entry and approval in avionics equipment are so high."
Cleland states that since January 2014 FLYHT has seen analyst coverage initiated by Clarus Securities, Byron Capital Markets, Salman Partners and Global Capital.
"We are initiating coverage with a SPECULATIVE BUY recommendation and $1.10 target price," states the Clarus report, "We estimate that the opportunity in China could generate ~$24-57 million in hardware revenue over the next three years, while incremental recurring annual revenue could be as high as $11 million".
“Following a solid year of bookings and optimistic market outlook, we are forecasting a substantial increase in hardware unit sales given the expanding pipeline provided by the 1) China retrofit market, 2) Airbus OEM factory installs, and 3) L3 retrofit opportunity.”
FLY’s Automated Flight Information Reporting System (AFIRS) is already being installed in Bombardier CRJ aircraft. The Civil Aviation Administration of China (CAAC) has recently stated that 50% of Chinese commercial transport aircraft must be equipped with Real Time Satellite Communications systems by 2015 - and 100% by the end of 2017.
"Crowded skies, aging fleets, outdated communications are stifling the airline industry," states the Byron report, "Rising accident statistics in recent years are forcing U.S. and EU regulators to implement next-generation navigation mandates by 2015." Byron initiated coverage with a STRONG BUY and a 12-month target of $1.25.
There are about 5,000 planes in the air at any given time. That number is expected to double by 2030.
"We believe that FLYHT is a leader in providing aircraft communication and flight data management solutions," stated the Salman Partners report, "The Company’s AFIRS product family is superior to the competition…in addition, the potential addressable market is very large as FLYHT is under penetrated within its key target markets."
The Salman Partners report forecasts "strong revenue and earnings growth in 2014 and 2015". It issued a SPECULATIVE BUY recommendation and a $0.85 target price [double its current share price].
On January 22, 2014 FLY announced successful delivery of 12 AFIRS 228S units to L-3, a leading provider of commercial and military avionics. The AFIRS technology has received regulatory certification for installation in approximately 31 widely used aircraft types.
"The AFIRS technology effectively eavesdrops on the sensor data passing through the aircraft’s data buses," states the May 4, 2014 Global Capital analyst report, "The device is programmed to capture, record, and analyze pre-selected criteria, including engine performance, excess vibration, and other system deviations that typically signal a need for maintenance."
"We are initiating coverage of FLYHT with a STRONG BUY rating,” states the Global Capital Report, “and a 12-month target price of $1.00."
"In the next 5 years, "Real Time Data Communications" will be standard equipment on new planes," stated a recent Technica Pro News article, "as ubiquitous as the rear view mirror in an automobile."
"Global movements catalyzed by the disappearance of Malaysian Flight 370 mean that the $2-$5 range for FLYHT is now quite possible on a 2-3 year basis," states Cleland, "Shorter-term, I will be surprised if we are not in the $1-$2 range by the end of 2014."
FLYHT is currently trading at .42 with a market cap of $70 million.
SOURCE: Technology Investment News