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Independent Reviews for Venture Investors

BYL.TO - Upside.


Baylin Technologies Inc. (BYL.TO) is a diversified global wireless technology management company. Baylin focuses on research, design, development, manufacturing and sales of passive and active radio-frequency products and services.


Coverage was initiated on September 2020 with an additional note issued May 2021.


News Releases


May 20 - Announces New Conversion Price for its Convertible Debentures: New conversion price of the Convertible Debentures has been set at $1.11 per common share. The New Conversion Price will remain in effect from May 20 until June 18, 2021, after which it will revert to the original conversion price of $3.85.


June 7 - Welcomes Leighton Carroll as New Chief Executive Officer: Effective June 21, 2021. Mr. Carroll succeeds Randy Dewey, who is stepping down from his management and board role but will be staying on in an advisory capacity for an interim period to support the transition to the new President and Chief Executive Officer.


June 18 - Shareholder Increases Interest: After giving effect to the conversion, Mr. Royer exercises control or direction over 29,401,572 common shares, representing approximately 48.7% of the 60,418,186 common shares outstanding (at June 4, 2021 after giving effect to the conversion), and none of the Debentures.


June 23 - Updates on Convertible Debentures: Holders of $12,135,000 principal amount of its $17,250,000; 6.5% Extendible Convertible Unsecured Debentures have converted their Debentures into common shares of the Company at the reduced conversion price of $1.11, leaving $5,115,000 of the Debentures outstanding.


Aug. 11 - Financial Results for the Second Quarter of 2021 and $10 Million Private Placement: i) Private Placement: 11,112,000 shares at $0.90 per Common Share for total proceeds of approximately $10 million. At least $10 million in proceeds is assured from (2385796 Ontario Inc.). BYL.V relying on the "financial hardship" exemption available to it under the rules of the TSX to permit the Insider to purchase more than 10% (62M) of the shares of the Company.


Outlook: BYL.V continues to face challenges brought about by the COVID-19 pandemic and expects that these will continue for the rest of 2021. However, second-half revenue and Adjusted EBITDA expected to show improvement.


Aug. 20 - Announces Repricing of $10 Million Private Placement: The gross proceeds will remain at a minimum of approximately $10 million (11,765,000 shares) but may be increased up to $15 million (17,648,000 shares). The net proceeds will be used for general working capital purposes and for the repayment of outstanding debt.


Sept. 1 - Completes First Tranche of Private Placement - Raises $10 Million: issued 11,765,000 Common Shares purchased by an Insider under the first tranche of the Offering, the Insider Group now holds 41,166,572 Common Shares, representing approximately 55.5% of the outstanding Common Shares (on an undiluted basis).


Oct. 12 -Announces Final Tranche of $15 Million Private Placement: The Final Tranche will be completed through the issuance of up to 5,883,000 Common Shares for gross proceeds of up to approximately $5 million.


Oct. 21 - Completes Second Tranche of $15 Million Private Placement:


Oct. 21 - Shareholder increase interest in Baylin Tech: After giving effect to the acquisition and final tranche of the private placement, 2385796 Ontario Inc. (238) holds 43,878,314 common shares, representing about 54.8% of the 80,095,014 common shares outstanding. An Associate of Mr. Royer holds 2,748,450 common shares. Together, the Associate and 238 hold 46,626,764 common shares, representing roughly 58.2% of the common shares outstanding.


Nov. 10 - Financial Results for the Third Quarter of 2021:


Outlook: BYL.V continues to face challenges brought about by the COVID-19 pandemic and expects that these will continue for the rest of 2021 and into 2022. Travel restrictions continue to hamper some activities as well as international travel. Overall, second-half revenue and Adjusted EBITDA expected to show improvement.


MMU: MMU facility in Vietnam continues to experience delay. During this time, our customer’s sales of their MMU products have softened significantly. This has led to a lower forecast through mid-year 2022. We now do not expect the facility to be production-ready for its intended purpose at any time in the next six months,


SatCom Group: Any benefit to the Satcom business line from the build-out of the related infrastructure is not expected to begin to be realized at the earliest until the second half of 2022.


Wireless: business line continues to be adversely affected by the delayed timing of in-building and small cell deployments due to the COVID-19 impact and increases in freight costs due to supply chain constraints.


Embedded Antennas: The business line continues to be stable performer. Despite a significant chipset shortage, this business line showed a significant increase in both revenue and volume in the third quarter of 2021 which is expected to conitnue in the fourth quarter. This business line continues to demonstrate a strong order book.


Nov. 26 - Announces Successful Conclusion of TSX Delisting Review: Received confirmation from the Toronto Stock Exchange (the "TSX") that the Company meets the TSX's requirements for continued listing. The listing review was initiated in connection with the Company's recent $15 million private placement of common shares.


Jan. 4 - Announces New CFO: Appoints Dan Nohdomi as Chief Financial Officer effective January 4, 2022.


Summary


Debentures

After the proposed amendements (from $3.85 to current market price) was approved by the annual and special shareholder meeting, a new conversion price of $1.11 was set in May 2021. This price remained active from May 20 until June 18, 2021, before reverting to the original conversion price of $3.85.


In late June 2021, it was disclosed the roughly 70% ($12.1M out of $17.2M) converted their Debentures into common shares of the Company at the reduced conversion price of $1.11.


Financing

In August 2021, a $10M Brokered Private Placement at $0.90 cents (no warrants) was initiated. At least $10 million in proceeds was assured from (2385796 Ontario Inc.). BYL.V relied on the "financial hardship" exemption available to it under the rules of the TSX to permit the Insider to purchase more than 10% (62M) of the shares of the Company.


A week later, it was repriced from $0.90 cents to $0.85 cents (no warrants) and increased from $10M (11M shares) up to $15M (17M shares). The proceeds were cited for general working capital purposes and debt repayment.


First tranche was completed in September 2021 for $10M and the second tranche in late October for $5M. Upon completion, 2385796 Ontario Inc. (238) held 43,878,314 common shares, 54.8% of the 80,095,014 common shares outstanding. An Associate of Mr. Royer helds 2,748,450 common shares. Together, the Associate and 238 held 46,626,764 common shares, representing roughly 58.2% of the common shares outstanding.


Earnings

The declining trends in revenue continued in FY2021. Baylin has reported lower revenues than FY 2020 in every single quarters. Net Income was also severly impacted in Q2 due to $15.9 million goodwill impairment charge relating to the 2018 acquisitions along with a one-time adjustment for lower R&D tax incentive in Satcom, and severance costs.

However, as of Q3 2021 reporting Cash was at $17M mostly due to the financing activities. In addition, Baylin reported that corporate backlog of purchase orders were at "historically high level" but unfortunately did not specify an amount.


Embedded Antenna continues to be a strong performers but Satcom, Wireless and MMU divisions are still challenged.


Innovation

Little by way of innovation from the company is shared via news release in the last nine months. This is rather unfortunate as Baylin has a R&D group who is involved in multiple endeavours.


Appointments

June 2021, Leighton Carroll joined as Chief Executing Officer. Recently, Dan Nohdomi as Chief Financial Officer.


In short

Similarly to the previous period, the majority of the communications were related to financing activities. Indeed, financial restructuring continued to be the focus along with cleansing the balance sheet and consolidating the ownership of the majority shareholder; Mr. Royer (2385796 Ontario Inc.). In the last nine months, this entity went from 44.2% to 54.8% owenership. This is significant since Baylin can be single handedly taken private.


The likelihood of this posibility cannot be ignored, but it is believed that Baylin is more likely to maximize shareholder value as an acquisition target from private equity or a larger entity looking for synergistic value.

Source: Baylin Investor Presentation.


In the meantime, Raymond James recently lowered its price target ($1.35) in line with Comark and PI Financial.

Source: MarketBeat


While a favorable outlook may not materialize before the second half of 2022, when it does market conditions for both Embedded and Infrastructure Antennas could provide some long awaited upside.



DISCLAIMER: The work included in this article is based on current events, technical charts, and the author’s opinions. It may contain errors, and you shouldn’t make any investment decision based solely on what you read here. This publication contains forward-looking statements, including but not limited to comments regarding predictions and projections. Forward-looking statements address future events and conditions and therefore involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated in such statements. The content of rally is provided for informational and entertainment purposes only and is not a recommendation to buy or sell any security. Always thoroughly do your own due diligence and talk to a licensed investment adviser prior to making any investment decisions - rally cannot take responsibility for your investment decisions.

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