Vecima Networks Invests in it's Network and buys Nokia Assets

 Vecima Networks (VCM) is largely a cable accessory hardware provider located in western Canada.It takes digital signals in the cable and transforms them into analogue format that is receivable by it's customer's modems.It has been unnoticed by investors for awhile and the stock price has languished in the $10 price range.But it has not been inactive.In 2020 it has increased it's investment in it's network by providing distributed access architecture hardware (DAA).DAA moves it's hardware (nodes) closer to the customer.In the past most of the hardware and engineering has been at the headend or hub.DAA moves equipment closer to the customer.This is "in response to network capacity pressures and to ramp up access network bandwidth."Or simply put to give a greater number of cable services to more customers.But DAA also allows advanced services and a better quality of signal to the customer.This is especially important for video services.VCM does not give shareholders the amount it has  spent on ramping up DAA or on Nokia assets.

Q2 Highlights

        The second quarter produced $30 million in revenues or a 15% increase from Q2 in 2020.However  adjusted EBITDA decreased from 2020 as the margin fell.Perhaps because the margin on new services or new customers is not yet  as great as on their traditional services or customers.Consequently VCM reported a net loss of $3 million versus a net income of $3.6 million in 2020.VCM adds that there was in this quarter a $1.5 million loss from foreign exchange.And importantly the number of employees increased from 368 in Q2 2020 to 466 in Q2 2021.

   2021 Stock Price 

      2020 was a good year for Vecima;it reported $20 million of adjusted EBITDA for 9 months and $6 million alone in Q3.My October 16,2020 blog on Workathon predicted a stock price of $13-$14 for December of 2020 and it was correct.It also predicted that revenues would increase but the margin could drop.Now it is reporting good increases in sales for it's Entra (distributed architecture system) service.Also it picked up 2 or 3 new cable systems to work with in 2020;this includes the American system called Midco.However this quarter has been spent improving it's network.This blog calls for only small increases in revenues and adjusted EBITDA in 2021 without introducing some kind of subscriber fee.Vecima has improved the quality and quantity of service to it's customers.A subscriber fee could  be arranged with the cable company for the better service.But with it investors can expect $40-$45 million in revenues and a stock price of $15-$16 per share.Without it revenues will remain about $25-$35 million and the stock price will be $13-$14 per share.      https://www.zacks.com/