Vislink (VLK): Behind The Scenes

13th Apr '13 by ExpectingValue

4 comments 7863 reads

Vislink (LON:VLK) has been recommended to me by a few different people now and mentioned by a couple of bloggers (I know Pauly Pilot is keen and I've a hunch there's someone I've forgotten..), so I thought I better check it out. The offer of a value opportunity shouldn't be refused! I usually start with a sentence of two detailing what the company I'm looking at does, but recently I've been having a bit more trouble with this. It's easy, as a layman, to understand how a company makes money renting vans or building houses. I don't find it quite as easy to unravel exactly where companies sit in a supply chain that isn't pointed towards me as an end-user, though; I'm no expert on the assembly of engines and other goods, for instance, and so the market dynamics are a bit more complicated. Bear that in mind when I talk about Vislink, then, because they occupy a rather lofty position - they provide broadcast solutions for some of the world's most recognisable events.

There's lots of pictures on their site of Vislink systems at F1 and football matches, for instance, or on news helicopters - and after some digging I ascertained (again, as someone completely uneducated in how the pictures on my television arrive at that television) that their equipment, and expertise, is essentially focused on the wireless transmission of that video/sound data from the point of capture to where it needs to be next down the chain of production. They talk about being 'first on the market' with practical digital wireless cameras, for instance, and they seem on the ball with new developments in growing markets - mobile news coverage, for instance. I can see how they make money - they're an integral piece of a huge market, with wide-ranging applications. They talk about the growing surveillance segment, for instance.

They're hardly small players, either. According to management, they hold what they think is about 20% of the global addressable broadcast market - a market that, they note (and I wouldn't dispute) is growing, particularly on other continents, with the shift to HD in Europe and the US and from analog to digital in other parts of the world. At first glance, this seems…

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johnrosier

23rd Apr '13

I agree with your conclusion! Just bought for JIC portfolio. See below:

Vislink (30.5p and 3.0% of JIC portfolio) I have this morning bought a new holding in Vislink which was initially brought to my attention by Paul Scott, writing in Stockopedia. In simple terms it provides equipment for the wireless transmission of video and sound from the camera to the central processing unit. Its main markets are in TV broadcast and security surveillance. For instance, it has announced today, with its first quarter trading statement that it has won a three year contract with Dorna Sports , who hold the exclusive rights for Moto GP, so that viewers can enjoy a drivers eye view as the motorbike speeds round the circuit. For more information on its products and markets see www.vislink.com

Current trading, as outlined in this morning's statement was nothing to write home about with first quarter order intake pretty much flat on last year at £13.3m. The bull case is centred around the Company achieving its aim of growing turnover to an annualised £80m by the end of next year with operating margins of 10%. This compares with 2012 numbers of £57m and 3.86% respectively. At a Capital markets event today management are explaining to investors and analysts how the Group aims to achieve its financial goals and will outline the growth drivers and opportunities in both its Broadcast and Surveillance markets.

Conclusion: Its market capitalisation is only £34.7m and it has a strong balance sheet with about £8.0m of cash which will no doubt be utilised making growth enhancing acquisitions. The valuation looks attractive at 10.6x 2013 earnings for 50% growth and 9.3x 2013 earnings for 14% growth. These numbers are based on existing market forecasts of turnover of £64.8m and operating margins of around 5% in 2014. Should management succeed in achieving its aims there should be scope for healthy upgrades to consensus forecasts. It is on an attractive prospective yield of 4.2% for 2013 and as a member of the FTSE Fledgeling Index has a full listing and is eligible for my ISA. (see transactions tab above)

www.JohnsInvestmentChronicle.com

7th Jun '13

Vislink ( 29.7p and 4.0% of JIC portfolio) I have this morning increased my holding in Vislink to 4.0%.

You can see the reasons I first bought a holding on 23rd April above.

I have added to the holding today as I think it is has the potential to be an exciting investment. Not only is the valuation cheap on price earnings (10.4x 2013, 9.1x 2004), Dividend yield (4.4% 2013) and price cash flow (9.9x) but it has net cash of around £8m and earnings forecasts have been upgraded throughout the last year. These numbers are based on existing market forecasts of turnover of £64.8m and operating margins of around 5% in 2014. Management is aiming to grow turnover to an annualised £80m by the end of next year with operating margins of 10%. If it succeeds there should be scope for further upgrades to consensus forecasts in the coming year.

On the 26th June, the same day as it goes ex its 1.25p final dividend, it is presenting to a large audience of investors which hopefully should improve its profile in the market and get the share price moving! (See transactions)

ExpectingValue

John,

Thanks for keeping us updated. Re: the first bit, I didn't realise it was ISA-able. Makes a nice change, it is a little annoying trying to find small caps that'll actually give you the tax benefit too!

It's a quirky little company. I was surprised at how central a role they seem to play in so many different markets; it's rare that you find a small cap that's a global market leader, and in such immediately recognisable markets, too.

19th Jun '13

Vislink (29.5p and 3.9% of JIC portfolio) I met the Executive Chairman, John Hawkins and Ian Davies, Group Finance Director yesterday. John Hawkins joined the Group, originally as a non-executive in December 2010 and has an excellent record in industry, including turning Anite from a £68m loss to £30m profit when he was Chief Executive.

The meeting gave me a much better understanding of the Company, its markets and the growth opportunities. It currently operates in two markets, Broadcast (c.82% of turnover) and Surveillance (c.18% of turnover) with similar margins in each. It has about 20% of the broadcast market but less than 5% of surveillance. It has two operational sites in the UK and one in the US and a direct sales force of 30 based in the UK, California, Florida, Dubai, Singapore and Australia.
In simple terms it provides the equipment to be enable the transmission of live video over wireless, video and IP technologies; its equipment will be used in outdoor sports for instance, where the camera cannot be linked by cable, (on the front of a Formula 1 car or for the cameraman running down the touch line). Equipment is replaced by broadcasters roughly every seven years but a change in "spectrum" such as that currently underway in Australia can give a welcome boost to sales.

The Company has identified surveillance as a high growth area and it received excellent references from the Metropolitan Police for the equipment it provided to police helicopters ahead of the Olympics. It expects the World Cup and Olympic games in Brazil to provide a boost to business.

In 2011 the Company was loss making. A strategic review under new Chairman, John Hawkins saw costs cut, mainly in middle management, by 22%. Greater discipline on identifying and pursuing growth opportunities was introduced. It returned to profit in 2012, making operating profits of £3.1m on turnover up 13.7% to £57.2m. It has been explicit in its target of achieving annualised turnover of £80m by December 2014 with a minimum operating margin of 10%. It made a complementary acquisition, Gigawave, for which the payback from synergies and increased sales was less than two years. It has a strong balance sheet with £8.1m cash and expects to make further acquisitions on the way to achieving its £80m turnover target.

The one draw-back to the businesses is that visibility of orders is only 3 months. Management however, seem to be focussed on making sure that opportunities are not missed and on being pro-active with customers where they know the replacement cycle is imminent.

Conclusion: It feels like a well managed company with plenty of growth opportunities. I liked the fact that managements' short term incentives are based on the Company beating market expectations as they stand at the at the start of each financial year. The valuation seems cheap on price earnings (10.4x 2013, 9.1x 2014), dividend yield (4.4% 2013), price cash flow (9.9x) and an enterprise value at £25m of less than half its sales. These numbers are based on existing market forecasts of turnover of £64.8m and operating margins of around 5% in 2014. Management is aiming to grow turnover to an annualised £80m by the end of next year with operating margins of 10%. If it succeeds, and having met them yesterday I have increased confidence that they will, there should be further upgrades to consensus forecasts in the coming year.
In the meantime it goes ex the 2012 dividend of 1.25p next Wednesday 26th June, giving a yield of 4.2%. I hvae a 4% holding and am sorely tempted to add. Happy Holder!

Vislink (VLK): Behind the scenes

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