Biometrics industry stocks this week

November 10, 2017 - 

As the biometrics industry continues to grow, Biometric Update is bringing a new focus to the stories around the stocks in the sector. Check in with this space each week for a rundown of the financial news and interesting ideas from the week that was.

This week we have added some companies to our biometrics industry stocks coverage. Both names have one thing in common–they’re reporting strong quarterly results.

Calgary, Alberta, Canada-based company, NovaTeqni Corporation is focused on biometrics as applied to voter validation and registration, as well as financial transactions.

Novaeteqni updated investors on its business plans in May. It’s worth revisiting that document, as the company has some interesting business lines on the go.

The update notes that management at NovaTeqni hustled to complete the prototypes of its election-focused technologies as, “More than 50 international elections will take place in 2018 with nearly 20 elections taking place in Africa. In order to be able to react quickly to these opportunities, the completion of the prototypes was a necessary step.”

Another interesting niche business line is the company’s, “Tobacco Farmers Management System.” Novateqni recently delivered Phase 1 of this system which is being used in Malawi to, “… allocate and track crop production as well as license farmers to produce a specific quota of tobacco.” According to the company tobacco production is one of the biggest exports of Malawi. Phase 2, will include track and trace of the crop from production to auctioneers and, “… will commence in the next couple of months followed by the incorporation of a payments module… “ The cloud based system has a number of applications within the agricultural sector, including the “cannabis industry.” Interesting. Many entrepreneurs are focused on the North American cannabis industry right now as laws in many jurisdictions are about to shift towards legalization. Many think there is a new gold rush dawning, not dissimilar to the riches on offer in the alcohol industry.

This past August NovaTeqni also announced a manufacturing and development agreement with a company, Mobizent LLC. The two will team up to produce a “rugged” mobile biometrics handheld computer, the MobiCHKII, that will be pitched to the federal government sector in the U.S. The MobiCHKII allows “on the spot” identification using fingerprints or smart cards and can be of use in law enforcement, border patrol, corporate security, refugee control and health care. Gerhard Mynhardt, CEO of Novateqni, was quoted as saying, “We are very pleased… We see significant potential for this product in many public and corporate sectors in North America as well as in other countries. We are looking forward to a long relationship with Mobizent… ”

Also interesting in the update is mention of, “…a relationship with Novus Holdings Ltd.,” a subsidiary of South African company, Naspers. Novus and Novateqni will pair up to supply election technologies in Liberia. Novus is providing, “… support, funding and financial strength for the project undertaken on behalf of the United Nations.” So revenues seem solid. But what is also interesting about this relationship is that Novus is owned by a company called Naspers. Naspers is a name likely unfamiliar to North Americans. But the connection may see Novateqni tap into a larger ecosystem of tech companies. Naspers is an internet and media group, offering online shopping, marketplaces, online payments and other services. According to its Wikipedia page, the market capitalization of Naspers is $66 billion, so it’s a major company. Today it is mostly known for its sizeable investment in major Chinese tech firm, Tencent, the operator of the well-known instant messenger platform QQ. Tencent also runs one of the largest web portals in the world’s most populous country. QQ.com, as well as the mobile chat service of choice among Chinese teens, WeChat. Tencent Music has more than 600 million active users and is said to be the world’s largest and most profitable. A story running in this week’s Fortune magazine notes that Tencent’s “… products are a leading example of Chinese innovation and its balance sheet has become a source of funds for startups around the world.” The company is now worth nearly $500 billion. The story goes on to say, “Tencent has saved the South African media company Naspers. Its early stake in Tencent is so valuable that investors have rated the core business of Naspers as worthless in comparison.” Inde​​ed, according to the Wikipedia page, the investment by Naspers in Tencent has boosted the Naspers share price by an amazing 900% since 2010 (principally due to gains at Tencent). Whatever the case, it seems like good company for NovaTeqni. The Tencent Wikipedia page also notes that the company employs more than 7000 active Communist Party members, “… 60 percent of which in leading technical positions throughout the firm, accounting for roughly 23 percent of its total workforce.” Tencent is clearly the company to be acquainted with in China.

In the past year, Novateqni also successfully supplied a Know-Your-Client system for Vodafone in Zambia. It also worked on a health registration system for QProxim in Nigeria. This past week Novateqni distributed a press release noting that that the CEO, Mynhardt, the CEO of Novateqni, and the company had reached an agreement with the company in respect to a loan of $380,302 advanced to the company. According to the press release Mr. Myhardt has agreed to accept 2,535,347 common shares at $0.15 per share in lieu of the repayment of the above-noted loan. Assuming the deal to swap shares for debt is accepted Mr. Mynhardt would be the beneficial owner of 45.9 percent of NovaTeqni’s outstanding common shares. The closing of the debt settlement is subject to the approval of the TSX Venture Exchange. But that the CEO is taking a larger share in the company is a good sign that an insider is confident over business in the months and years to come. The shares issued to Mr. Mynhardt will be subject to a hold period of four months.

Novateqni is listed on the TSX Venture Exchange under the symbol “NTQ” and the over-the-counter (OTCQB) market under the symbol “NVTQF”. It closed Thursday at $0.20, up over 5% on the day. Investors like the story.

SuperCom Ltd. is headquartered in Herzliya, Israel and supplies security products in the e-government, public safety, healthcare, and finance sectors. Some recent projects are indicative of what it is the company is providing.

In September the company won an eight-year contract with the government of Iceland for the development, delivery and maintenance of a new “central personalization system.” According to a press release, “The new Icelandic ePassport personalization system will leverage SuperCom’s cyber secure Magna National Population Registry platform, which uses the most advanced ePassport and e-ID technology to provide improved secure documents issuance…” The release goes on to note the contract was awarded after an international competitive tender during that attracted twelve bids.

In July the company secured a national four-year contract with the Ministry of Justice of Denmark and has since begun deployment of the “PureSecurity Electronic Monitoring Suite to track up to 1,000 offenders.”

Also in July, a SuperCom subsidiary, Leaders in Community Alternatives (LCA), secured a, “… multi-year contract to provide pretrial and early intervention court services, and electronic monitoring services to the Alameda County Probation Department in Northern California.” In October, LCA was also awarded a contract to provide, “… RF home detention, GPS tracking and monitoring, as well as alcohol monitoring to a new county probation department in Northern California.”

According to SuperCom management, the last program mentioned has already begun generating recurring revenues. That cash contributed to the strong financials reported when the company released its third quarter numbers this past week. Investors were impressed as SuperCom reported record revenue growth of 89% and a 21% gain in earnings. Third quarter revenue came in at $9.6 million. That’s a record and up from $5.1 million in the most recent quarter. Gross profit increased by 201% to $5.1 million from $1.7 million. Earnings increased to $2 million from a loss of $ 2.2 million. Arie Trabelsi, SuperCom’s president and CEO, was quoted as saying, “I am very pleased with our performance this quarter, reaching record quarterly revenues… After three consecutive quarters of dramatically improved financial performance, it is becoming apparent how impactful our enhanced business model is and how important the transition of 2016, however challenging, was to SuperCom’s future.”

At the end of last year Trabelsi admitted that the company’s financial results were “disappointing.” But the company also made four acquisitions in 2016 that expanded “addressable markets,” and “enhanced the quality and diversity of our revenue base, and broadened our technology offering.” That is, SuperCom strategically transformed from being primarily a, “… secured electronic ID company for government identity programs at the beginning of 2016 to becoming a leading provider of e-government and security solutions across multiple high growth markets including national identity, electronic offender monitoring and cybersecurity.” According to Trabelsi at the time, “An important evolution in 2016 is the shift to higher quality revenue with a healthier mix to support long term growth.” According to the most recent results the company seems to be fulfilling that promise. In the most recent release Trabelsi said, “Today, we can not only better serve the chief security officer of a nation or enterprise with three interconnected divisions in the e-Gov, IoT and Cybersecurity markets, but also operate our business much more effectively, realizing significant synergies…” He also went on to say that the company remains, “… confident in our previously stated expectation that the percentage of our steady-state revenue from developed markets will grow from less than 5% in 2015 to close to 50% in 2017.” This broader and higher-quality revenue base reduces the volatility the company has experienced in the past due to a concentration of business with national governments within emerging market. Trabelsi said the company’s current pipeline of projects and products is stronger across various geographies and markets. He remains, “.., confident in our ability to keep this positive momentum going through the remainder of this year and into 2018.” Investors like the story.

SuperCom trades on NASDAQ under the ticker, SPCB. The company’s shares are trading around USD $4.15.

It seems the number of biometric technology-related stories in the media is greater than ever. One story this week that stands out emphasizes the importance of securing your mobile devices with a combination of biometric authentication and knowledge-based authentication. According to the Times of India, a Qatar Airways plane was forced to land after a woman, “… used her sleeping husband’s thumb to unlock his smartphone,” and then discovered he was having an affair. The story went on to say that the, “… woman repeatedly hit her husband after learning of his infidelity and the captain was forced to make an unscheduled stop in Chennai, India, when the cabin crew was unable to restore order.”

Tune in again next week for new look at some public companies in the sector, including Egis Technology Incorporated!

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About Jeff Sanford

Jeff Sanford has worked as a business journalist for more than fifteen years. He has held staff jobs at major commercial publications such as Canadian Business and National Post Business magazine. He has contributed to various Canadian, U.S. and UK-based publications. He has written about markets, economy, finance, energy, infrastructure, government policy and technology. He currently lives and works in the west-end Toronto neighbourhood of Parkdale.