Biometrics stocks this week: Aware, BIO-key, FPC, Suprema
First quarter earnings season is under way and corporations are generally posting solid results. This winter’s tax cut legislation is still having a positive effect. But even though 83% of the companies on the S&P 500 have beat estimates so far, stocks are still trading down. That’s odd. Even the FANG stocks, which are delivering huge profits, are down.
One major global company that has sold off along with recent declines in the wider market is a massive Chinese insurer called Ping An. But the company enjoyed such a large increase in its stock price in 2017 (shares increased from CNY 37.00 in April of last year to over CNY 77.00 by January of 2018) that recent declines are negligible.
It seems investors like the company’s plan, which is to spend huge amounts of money on technology, especially face-ID products for the healthcare and financial sectors.
Last week in this space it was noted that there is a remarkable amount of Chinese government money being invested in that country’s tech sector. But private companies like Ping An are also investing massive amounts in tech as well. In the case of Ping An, it was recently announced the company will spend a massive 7.77 billion yuan (US $1.16 billion) on tech, particularly in the area of biometrics and artificial intelligence.
According to a recent article in the state-run Chinese media (which was typically fawning) Ping An has some 200 corporate clients, many of them banks. Ping An is working on facial recognition tech that it can offer these clients. The company’s most recent facial and voice recognition-based payment app has already been used 300 million times since last July according to the report. These technologies are going to allow the company to deploy a “physical person verification system” that will allow customers to complete loan applications in about six minutes. No wonder so many investors have jumped in. The stock is still trading at CNY 63.15, even as the sell-offs continue.
Bedford, Massachusetts-based Aware just released first quarter earnings. The publicly held firm realized a decline in revenue for the first quarter of 2018. The company brought in $2.9 million, which is down 30% from last year. The company blamed the decrease to lower sales of biometrics-based software licenses and lower service revenue (among other things). All in the company reported a net loss for the first quarter of $0.5 million, or $0.02 per share, a bit more than the loss of $0.3 million ($0.01 per share) in the same period a year ago. “Our results for the first quarter were below our expectations,” said Kevin Russell, CEO. “We have a number of opportunities that we are working on that we were not able to close in the first quarter. Our pipeline for 2018 looks promising, but we are unable to predict when opportunities will result in revenue. We continue to see interest in our product offerings in the government, commercial and mobile markets.”
The company also announced a plan to repurchase stocks in the year to come. Today, more corporations than ever are using share buybacks to distribute cash to stock owners. Traditionally companies pay out the profit of a company to shareholders through dividend payments. But many companies now use share buybacks. The company buys up shares on the open market, cancels those. The overall share count is reduced. This boosts the earnings accruing to each share. The increase in earnings per share adds to the wealth of the shareholder through the buyback, rather than through a dividend payment. This can also help support a stock through a period of slower sales, by creating demand for the stock. And that’s good for shareholders. In the case of Aware the board of directors has approved a program authorizing the company to purchase up to $10 million of its common stock by December 31, 2019. The company may purchase shares from time to time in the open market or through privately negotiated transactions. As of April 23, 2018, the company had 21,546,818 shares of common stock outstanding. Repurchases will be made under the program using the company’s own cash resources and will be in accordance with SEC rules. Announcing such a program does not obligate the company to acquire any particular amount of common stock; the program may be modified or suspended at any time according to a press release. The company still has over $50 million of cash and cash equivalents.
Shares in Aware were treading down at about US $3.92 by the end of day Thursday.
Maxim Group initiated coverage of BIO-key International this week. The financial services firm kicked off its coverage with a ‘Buy’ rating on the stock and a price target of $5.50. The company noted that Song Wong Wok, director, has been buying shares of late. According to a report, 11.4% of the outstanding shares of BIO-key are owned by insiders, a good sign (institutional investors hold about 1.58% of the outstanding shares). Shares in BIO-key were trading at USD $2.11 late in the day.
According to a report on news service Reuters, Fingerprint Cards on Thursday proposed its main shareholder and former CEO Johan Carlstrom replace the current chairman. The company continues to turn over staff as it negotiates a shift in the market. This is similar to many other companies in the sector right now. But the Reuters report notes the proposal comes, “… despite [Carlstrom’s] upcoming trial for suspected insider trading.” The news story goes on to note that FPC has issued a string of profit warnings over the past year and is now cutting staff in the face of slow demand and price pressure from competitors. “Carlstrom was replaced as CEO in 2014 after police launched a probe into suspected insider trading in Fingerprint, and he will face a trial at a Stockholm district court in November. He has denied the allegations and declined to comment on the board changes on Thursday,” according to the report. But it was just last month that CFO Hassan Tabrizi and Jan Johannesson, vice president strategy and corporate development, were let go from the company. As well, current chairman Jan Wareby and board members Asa Hedin, Carl-Johan von Plomgren and Ann-Sofie Nordh are all declining to be re-nominated to the board. It seems Carlstrom feels he needs to get back behind the controls before the ships gets off course with such dramatic turnover occuring. Fingerprint Cards is getting set to report Q1 earnings May 3rd. Carlstrom is still a major owner of the company, with almost 16% of outstanding shares. Shares in FPC were down less than one percent this week.
Korean biometric company Suprema established a subsidiary in the middle east late last year. This week the company announced that subsidiary, Suprema Middle East, is set to show off its products at the Saudi Arabian tech showcase, Intersec Saudi Arabia 2018, to be held at the Jeddah Center for Forums and Events from April 24 to 26. The company will demonstrate its CoreStation, which is said to be capable of handling 500,000 users at fingerprint matching speeds of up to 400,000 matches per second (with access control spread across 132 access points). Suprema will also showcase the new XPass D2 series RF card readers at the show. It’s likely a good time to be in Saudi Arabia. If oil prices are going up the country’s economy can be expected to do well. This very week it was reported that Bank of America Merrill Lynch Global Research has published a report claiming that the Saudi Arabian economy is in a so-called “sweet spot”, with higher oil prices allowing the Kingdom to boost spending. The government is also undertaking a privatization plan of state-owned assets as Crown Prince Mohammed bin Salman plows ahead with his Vision 2030 strategy to reduce oil dependency in the kingdom. Considering recent upheavals in the country security systems must be in high demand.