BYL.TO - Attractive.


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.


BYL operates in four main divisions which combined have a total addressable market (TAM) of over $15B. These are Embedded Antennas ($5.7B), Infrastructure Antennas ($7.5B), Satellite Connectivity Products($4.0B), Mobile Antennas ($0.9B). Embedded and Infrastructure Antennas are the largest and fastest growing segments.


Baylin also has an impressive list of industry leading clients in North America and across the world.



BYL serves its client through three subsidiaries: Galtronics, Advantech and Alga.


Galtronics

Baylin’s first subsidiary is a "pure play" antenna company. It specializes in RF engineering: mobile, small cell, DAS and BSA /infrastructure and embedded antenna solutions.


For Galtronics, Embeded Antennas are a growing segment as many company are moving to this solutions. Moreover, many Telcom and Broadcast companies are moving to enhance their capacities for their devices and clients' needs.


Cellular IoT (cIoT) are also an area of specialization for the company. Galtronics is among a handful of vendors that are certified with global carriers. In addition, the rising demand in extended network coverage, along with initiatives like "smart cities" and the trend of responsible energy management are driving factors.


Advantech

Baylin acquired Advantech in January 2018 . Advantech's expertise is in broadband communications as a solution provider for Commercial, Critical Infrastructure & Government and Military clients.


Alga

Baylin purchased Alga in July 2018. Alga, synergistic to Advantech, is a major supplier of Radio Frequency (RF) and Microwave Solid State Power Amplifiers (SSPAs), Pulsed Amplifier for Radar Applications, Transmitter and Transceiver products as well as RF Passive Components and systems.


Both Advantech and Alga products are designed, assembled in a research/manufacturing facility in Montreal, Canada.


Commercial applications for both companies are a) In Flight Connectivity via SATCOM, b) SATCOM on the sea (Cargo and Fishing Ships), c) 5G Cellular Network Expansion (SATCOM for Backhaul) among others. Advantech and Alga also have applications in Critical infrastructure, Government and Military. For instance, expanding military retooling by NATO countries, as well as, the upgrade of infrastructure of communication networks in US and EU are growth drivers.


News Releases


Feb. 21 - Announces Filing of Short Form Base Shelf Prospectus: It will allow the Company to offer up to $100,000,000 of common shares, preferred shares, debt securities, subscription receipts, warrants or units, or any combination of those securities, during the 25-month period that the base shelf prospectus remains effective.


The specific terms of any offering under the base shelf prospectus will be described in an accompanying prospectus supplement, which will be filed with securities regulatory authorities.


Mar. 12 - Announces Financial Results for Fiscal 2019.


"In the fourth quarter of 2019, we reduced the Company's revolving credit facility by $4.1 million and decreased total debt by $5.6 million", stated Michael Wolfe, Baylin's Chief Financial Officer. "Our cash balances combined with our available credit facilities are expected to provide the Company with sufficient liquidity to continue to make investments in all areas of the business and to meet all financial obligations", added Mr. Wolfe.


Mar. 26 - Remains Open for Business to Provide Essential Infrastructure Products:


Apr. 6 - Provides Update on Cost Reduction Initiatives, and Q1 2020 Financial Reporting: In addition to efficiencies implemented in Q4 2019, the Company has implemented a cost saving plan that will reduce expenses by approximately $6.5 million annually, of which approximately one-third of the reduction is expected to be permanent.


Apr. 7 - Receives Purchase Orders in Excess of 1.2 Million Dollars: Advantech received over $1.2 million in purchase orders for its Satcom frequency converters for a major US carrier and for NATO's Naval Satcom Modernization program which requires products offering military-grade performance when operated in less than ideal conditions.


High quality RF converters are a key element in systems designed for wideband services such as 5G, regardless of whether the application is GEO, MEO or LEO.


Apr. 14 - Receives Initial $650k Purchase Order For the Recently Founded United States Space Force: its subsidiary, Advantech has received an initial order of $650k for its high power S-band solid state power amplifiers (SSPA).

Randy Dewey, President and CEO of Baylin, stated, "this initial order of our 1250W amplifiers will support telemetry, tracking and control of orbiting spacecraft in the U.S. Space Force system. Additional orders to expand the network are expected following the initial deployment of these products. "

May 6 - Signs Five Million Dollar Supply Agreement to Supply Global Tier 1 Satellite Network Providers: Alga has signed a supply agreement with a global Tier 1 satellite and terrestrial telecommunications network provider to supply over $5 million of its C-Band 5G Filters. Deliveries are expected to commence in June 2020.

May 14 - Mails Notice to Holders of its Convertible Debentures: To: Holders of $17,250,000, 6.5% Extendible Convertible Unsecured Debentures due July 23, 2023 of Baylin Technologies Inc.


We, Baylin Technologies Inc., are offering holders of our 6.5% Extendible Convertible Unsecured Debentures (the "Debentures") an option to elect to receive our common shares in payment of interest due on the Debentures on the interest payment date on June 30, 2020 as an alternative to cash interest.


May 20 - Receives 2.5 Million Dollar (CAD$) Purchase Order to Supply USA Satellite Network Provider: Alga has received a purchase order for over $2.5 million of its C-Band 5G Filters. Alga's specialized 5G filters are designed to prevent interference between the cellular and satellite networks.

Randy Dewey, President and CEO of Baylin, stated, "The 5G global network mass deployment that is underway makes filter technology increasingly critical. With the introduction of 5G networks, C-band frequencies will now be shared with a wider range of services. Alga's filter has been designed specifically to clear portions of the C-band spectrum."


May 27 -Receives Over $700k (CAD) in Purchase Orders of its Whip Antennas for Deployment in NYC: Galtronics has received purchase orders totalling over $700,000 (CAD) for its small diameter multiband MIMO antennas.


June 8 - Receives Over $1.3 Million (CAD) in Purchase Orders From a European System Integrator. Alga has received purchase orders totaling over $1.3 million for its C-Band and Ku-Band BUC transmitters.

Alga's C-Band and Ku-Band transmitters are used in the broadcast of satellite signals by converting the corresponding band of frequencies from a lower frequency to a higher frequency. The lightweight Alga solutions are built for VSAT stabilized platforms and mobile earth stations while offering benefits for fixed site and offshore applications as well.

"These purchase orders are from an existing customer and the products will be used to update their ground stations", explained Randy Dewey, President and CEO of Baylin.


June 16 -Announces Financial Results for the First Quarter of 2020. The initial stages of the pandemic had a disruptive effect on each of the Company's lines of business in February and March: (i) Asia Pacific's revenue was impacted, initially caused by supply chain shortages in China and then by lower consumer demand due to commercial store lockdowns in Europe and North America; (ii) Wireless Infrastructure and Embedded Antenna's revenues were impacted by delayed shipments in China during the government mandated extension of the Lunar New Year holiday; and, (iii) Satcom generated lower revenue due to less demand from its commercial customers, which was somewhat offset by strength of emergency services and military customers.


All of the Company's business lines have recently seen an increase in sales orders and planning for the second half of the year appears robust, in particular the mobile business has a much-improved forecast due to pent up demand in this sector during the lockdown and the re-opening of cellular stores. As a result, management expects higher revenue in each of the remaining quarters in 2020 compared to the first quarter of 2020.


The Massive MIMO Unit factory construction in Vietnam has been delayed due to travel restrictions. This in turn has meant that critical equipment suppliers could not finalize installations and equipment calibrations and customers had to postpone final manufacturing certification audits. As a result, management does not expect production to begin until the fourth quarter of this year, contingent on the Vietnam airport opening on July 1, 2020.


June 24 - Receives 2.4 Million Dollar (CAD$) Purchase Order to Supply International Communications Company. Alga received a purchase order for over $2.4 million of its C-Band 5G Filters.


Alga's 5G filters have undergone strenuous approval processes. In the new 5G cellular network, Alga's specialized 5G filters are designed to prevent interference between the cellular and satellite networks.

"We are very pleased with the demand for Alga's 5G filters. This order has been requested by an international communications company whose primary focus is supplying turn-key solutions to the CATV, broadcast and satellite markets." - Randy Dewey, President and CEO of Baylin.


June 26 - Signs Multi-Year Agreement to Supply Major Satcom System Integrator: Advantech signed a multi-year agreement to supply a major Satcom system integrator with its Summit II high power SSPA systems.

"Advantech has been contracted by a major satcom system integrator to support a multi-year program. We have received the initial purchase order of more than $2 million dollars (CAD). Under the terms of the agreement, Advantech will supply its Summit II high power SSPA systems to the integrator's project" - Randy Dewey, President and CEO of Baylin


July 2 - Funds Debenture Interest Through Common Share Issuance: Issued 623,406 shares to fund interest due on June 30, 2020 on its 6.5% Convertible Unsecured Debentures. A total of 355,840 shares were issued to debenture holders that held 58.8% of the debentures, these holders having elected to receive common shares in lieu of cash interest.


Additionally, 14 insiders, including C-suite, Management and Directors, purchased 267,566 common shares through a private placement. The common shares were all issued at $0.9259 per common share, representing 85% of the volume-weighted average price of the common shares on the Toronto Stock Exchange for five trading days ended June 29, 2020.

Aug. 13 - Announces Voting Results From The 2020 Annual Meeting Of Shareholders.


Aug. 12 - Financial Results for the Second Quarter of 2020:


"In the first half of 2020, Asia Pacific revenue was the most impacted of our product lines from COVID-19 due to the stark decline in global smartphone sales as a result of commercial store closures. We have seen significant improvement as commercial cellular stores began to re-open across North America and Europe starting in May 2020, and we expect this to continue through the second half of 2020", stated Randy Dewey, Baylin's President and Chief Executive Officer.


Summary


Financing

In February, BYL filed a short form base shelf prospectus allowing the company to access $100M in securities (common shares, preferred shares, debt securities, subscription receipts, warrants or units) for 25 months. The filings revealed:


The Corporation intends to use the net proceeds from any offering of Securities for one or a combination of (i) capital expenditures, including to support ongoing research and development activities, (ii) working capital, (iii) debt reduction, (iv) acquisitions and (v) general corporate purposes.


In July, BYL successfully issued 623,406 shares to fund interest due on June 30, 2020 on its 6.5% Convertible Unsecured Debentures. Also, 14 insiders, including C-suite, Management and Directors, purchased 267,566 common shares at $0.9259 through a private placement. The proceeds were used to pay interest on the convertible debentures on the June 30, 2020 interest payment. The rest will be used to pay interest for those in December 31, 2020.


Purchase Orders

Below are the Purchase Orders (PO) which were issued a news release for this period.


Galtronics: In May, a $0.7M PO for Whip Antennas (small diameter multiband mimo) was received.


Advantech: In April, a $1.2M PO was received from a Major US Carrier and NATO's Naval SATCOM. Also in the same month, a $0.6M order was received for the US Space Force System. In June, an initial PO of $2M with for a major satcom was receives as part of a multi-year agreement.


Alga: In May, Alga signed a $5M supply agreement with a global Tier 1 satellite and terrestrial telecommunications network provider. Also in May, Alga also received a PO for $2.5M for C-Band 5G filters. In June, a $1.3M PO from European System Agregators and a $2.4M PO to an international communications company.


Earnings

In the last three years, BYL meaningfully increased its top line (revenue and gross profit). However, the bottom line has been significantly impacted. In fact, a $12.7M in impairment charges were incurred in Q4 2019 resulting from the acquisition and integration of Advantech and Alga.













In addition, Covid-19 impacted on Baylin's Q1 and Q2 Earnings. However, at the Q2 Earnings, the company provided a more optimistic outlook while also cautioned about uncertainty.


"...expects to see a continuing improvement across its business lines during the remainder of the year as governments continue to lift restrictions on commercial activities, leading to higher expected revenue in the second half of 2020 compared to the first half; however, there is uncertainty how quickly this will occur for each of the business lines."


Insider Activity

In September, three insider purchases for 2385796 Ontario Inc. for over $100.000.00 were registered.


In short

Baylin's short form base shelf prospectus for $100M earlier this year is notable. Cited were multiple use including (i) capital expenditures, including to support ongoing research and development activities, (ii) working capital, (iii) debt reduction, (iv) acquisitions and (v) general corporate purpose.


Interestingly, Baylin's growth in the last three years are a direct result of acquisitions. Also notable is this segment:


Multiple players, but consolidation awaits Telecom Operators' Technology

Unlike the mobile phone industry, RF front end component manufacturers in the telecom infrastructure industry are numerous and specialized. A lot of different technological platforms are used, leading to a wide variety of components being available. In this fragmented industry, very few acquisitions have been seen lately and there has been little investment in start-ups. This is due to the fact that the industry is still unsure about the choices telecom operators will make in terms of deployment. - EverythingRF: Active & Passive Antenna Systems Market (November 2019).

The fact that Baylin is currently building a Massive MIMO Unit Factory in Vietnam for a Tier One Network Equipment Supplier (announced last year.) is also telling. Stated in that release at the time of publication: There will be additional 5G products produced in this facility commencing at a later date.


Covid-19 certainly impacted the company in the first two quarters of 2020, and there is still uncertainty on how long this will last but as demonstrated by the order generated in the last eight month, Baylin is well diversified. Additionally, the company is cautiously optimistic and believes that Q3 and Q4 should generate higher revenues. Recent insider purchases might be an confirmation. Note that 2385796 Ontario Inc. has been with Baylin from the start.


Recently, PI Financial issued a target of $1.60 citing improvement for the second half of 2020. Others are listed below.

Source: MarketBeat


Given its current valuation and outlook, Baylin is considered to be attractive.


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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