VIDEO: Why nano satellite maker Sky and Space Global has first-mover advantage
Special Report: Sky and Space Global has first-mover advantage in its quest to launch a fleet of miniature satellites to provide low-cost data services, says tech expert Tim Knapton of TechVoyage.
“I don’t think I can name an ASX-listed company that’s quite as technologically aspirational as Sky and Space Global (ASX:SAS), which is about to deploy a constellation of 200 nano-satellites into equatorial orbit to provide affordable narrowband communications to the region, including its most impoverished nations.”
Incredibly, almost a third of the world’s population is still without 3G mobile data connectivity, the majority of whom are in the company’s equatorial coverage area – Africa, South East Asia and Latin America.
The reason is a lack of cellular network infrastructure, which in turn is driven by regional poverty, or network unaffordability.
“Sky and Space Global is significantly reducing infrastructure cost through a combination of miniaturisation in the form of its nano-satellites — and more importantly through proprietary network management software to autonomously manage satellite deployment, orbital control and communications.”
In turn this minimises launch and operational costs and critically the scale of ground station infrastructure.
The company’s team of Israeli and UK scientists and engineers is highly credentialed and led by CEO Meir Moalem who was project manager of Israel’s first astronaut flight and was involved in the Israeli Space Program.
And the company’s Chief Technology Officer led the team responsible for the launch of Israel’s first nano satellite, which is still operating today.
Over the last four years Sky and Space Global has passed numerous key tech milestones, some world firsts, in the design, fabrication, launch and now operational proofing of its intellectual property.
In May this year, indeed, the company completed testing the technical and commercial functionality of its 3 Diamonds nano-satellites in polar orbit.
Importantly, the test results were to the full satisfaction of Latin American telco Globalsat Group, with whom the company is now negotiating a full commercial agreement.
Starting next year the company will launch a couple of dozen Pearl operational nano-satellites per quarter in order to assemble the 200 satellite constellation in equatorial orbit.
This will deliver uninterrupted low cost network coverage to a region containing almost 3 billion people.
The Pearl is the most advanced nano-satellite ever, with 150Watts of power, an advanced tracking solar panel array and advanced communications payload.
Within barely a year, Sky and Space can begin delivering meaningful network coverage and hence will start achieving revenue traction.
This is essentially a B2B infrastructure play.
About half the network’s revenue is expected to come from providing additional cellular network coverage to regional telcos and the balance from direct sales to enterprise and government customers for instant messaging, secure data transfers, email, and enabling Machine to Machine communications for real time asset tracking and security applications.
The company does face competition from either the likes of:
Sky and Space also has first-mover advantage and has signed inaugural contracts with localised telcos such as Sat Space Africa and Universal Cyberlinks, and with mobile service providers such as Globalsat Group and BeepTool.
The company has been audacious enough to project annual revenues of up to $1 billion dollars per annum within five years, on the basis that a single decent regional contract could be worth up to $50 million per annum.
To get there though, Sky and Space needs to be able to fund its $160 million constellation deployment and the $40 million capex required to replace 25 per cent of the network each year.
But the technology’s architecture is such that the majority of its costs are in deployment not operations and so the EBITDA margin is conceivably well over 50 per cent.
So I guess this is the ultimate high conviction investment in that if Sky and Space were to achieve only say 20 per cent of its upper revenue target that could translate to free cash generation of $60million per annum.
That, along with its implicit strategic attractiveness to a telco major, would make the current $180 million market cap look very modest.
So Sky and Space has now proven the functionality of its planned nano-satellite constellation.
Subject to further funding it will achieve commercial revenue traction in barely twelve months.
If it then hits even a fraction of its revenue target it should surely command a market cap multiples higher than the current level.