How to Profit from Soaring CapEx Spending in Telecom - RedChip.com

How to Profit from Soaring CapEx Spending in Telecom


Increasing demand, technology advancements, and other market disruptions are driving significant capital expenditures in the telecom space.

Telecom service providers are investing in everything from 5G and Internet of Things (IOT) deployments, small cell densification, expanding fiber networks to support growing backhaul needs, and more.

In total, US wireless carrier CapEx spending is expected to reach $88 billion in 2019, up from just $32 billion in 2015.

Rapid spending growth is also happening in the enterprise market.

Driven by private network and facility coverage demand, infrastructure 2.0 initiatives, and the explosion of smart phones, tablets and other devices, enterprise customers add billions more to the near-term market opportunity.

Much of this work, both in the enterprise and service provider markets, is performed by outside contractors, often smaller, regional solutions providers.

We’ve identified one such solutions provider, a microcap stock with a significant track record of work with major customers across the US, Canada, and Caribbean.

This Florida-based company, Spectrum Global Solutions (OTC: SGSIF), has proven its ability to sell and support Fortune 1000 accounts and Tier 1, 2, and 3 carriers, and its poised for explosive growth.

SGSIF Reported Positive Net Income for Q2

In January, SGSIF reported more than $2 million in revenue for the quarter ended November 30. In combination with a decrease in derivative liabilities and other non-cash expenses, this enabled SGSIF to generate $1.7 million in positive net income for the quarter.

More recently, SGSIF announced a definitive agreement to acquire Georgia-based ADEX Corporation, whose annual revenue in 2017 was more than $20 million with adjusted EBITDA of over $1 million.

Significantly Undervalued

SGSIF trades for a market cap of around $3 million today, barely 50% more than its most recently reported quarterly revenue. A more realistic valuation would be several times the company’s annual sales, which even on a trailing basis would mean the potential for gains of several hundred percent for investors buying at these levels.

Factor in growth going forward from its AW Solutions business, and the potential for $20 million or more in additional revenue from its acquisition of ADEX, and the upside could be even greater.

Pursuing Acquisition Strategy

In addition to the pending acquisition of ADEX, SGSIF is actively targeting professional services, technical services, and installation/construction companies in the wireline and wireless telecom space.

SGSIF looks for target companies with established reputations for excellence, strong management teams, aligned visions, and effective internal controls.

Ideal targets are also accretive to earnings, and will bring long-term customer relationships, strong growth potential, and the ability to scale.

Additional Upside Potential from Energy Segment

Through its Mantra Energy Alternatives subsidiary, SGSIF looks to develop and commercialize alternative energy solutions.

Formed in 2007, Mantra Energy has acquired and owns a process for reducing carbon dioxide known as ERC (electro-reduction of carbon dioxide) and has acquired an exclusive worldwide license for an innovative mixed reactant fuel cell technology.

Positive developments at Mantra could produce further upside catalysts for SGSIF shares.

Learn more about SGSIF by watching our exclusive interview with CEO Keith Hayter.

 

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