TerraNet's (ST:TERRNTb) 2017 earnings show the group continuing to move closer to generating licence revenues from its technology portfolio, while keeping a tight control over costs. China is proving a key market for the group: Chinese tech giants, Tencent Gaming and Alipay, and cellphone manufacturers, Oppo and Vivo, are shortly to begin trialling TerraNet’s software. Furthermore, the recent launch of the Android Oreo 8.1 operating system should enable the group to resume its launch of proximal connectivity SDKs in China later this year. Year-end cash reserves were SEK62.4m ($7.6m). Our forecasts suggest this will be sufficient to fund the business until late 2018. Helped by lower than forecast cash burn in 2017 and the prospect of lower capex and WC outflows, we have increased our valuation range for the shares from SEK12.6-14.4 to SEK13.4-15.4.
High-potential China trials with Tencent and Alipay
TerraNet has created a diversified stable of products based on different applications of its proprietary know-how in off-grid (outside Wi-Fi or cellular networks) mobile communication and content streaming, vehicle positioning, platooning, V2X communications and proximal connectivity software. The group has been highly successful in developing innovative use cases for its technology and attracting leading global businesses to its products. The latest, encrypted off-grid mPay services, fits these criteria well on both grounds.
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