TSX:APV.V

Yesterday Apivio (APV.V) announced it has signed a distribution agreement with NEC Global, allowing sales to any NEC sales operation worldwide. This is a geographic expansion as its previous arrangement with NEC was only with NEC North America. NEC contributes the majority of sales outside of Korea to Apivio.

The product being sold OEM by NEC, the Monet M1 phone, was introduced by NEC in late 2014. It is called the NEC UT880 ($600) when sold by NEC. It is an Android-based VOIP desk phone with a large, 7-inch touch screen display. Analysts believe the ASP price to Apivio is approximately $150. This phone can run general Android apps or Apps written for specific corporate functions downloaded from the NEC App Store.

In 2015, this phone generated $3 million CAD in revenue (5% of total sales), but has only contributed $300,000 CAD in revenues to date in 2016. The company expects to be shipping to NEC via its new global agreement in Q3 of 2017. We believe the initial sell in to NEC North America was 10,000 units in 2015, and we think the global distribution sell in could be the same amount but overall sales much greater.

Other Opportunities Include New Products and New Distribution

The company has also starting to ship a new version of its Wi-Fi handset, the Liberty L2 (MSRP $198) to distributors and resellers. This phone’s main opportunity should be in workplace environments that require secure mobile communications across their Wi-Fi network and in multiple facilities, such as in warehousing, healthcare, and other vertical markets.

Investors Are Looking for Revenue Growth to Return

With the stock trading at an enterprise value of $15.4 million CAD, and the consensus 2016 revenues projected at $56 million CAD, the EV/Sales multiple is only 0.3x. The company is profitable and EBITDA positive and is undervalued versus its peers. Returning to year over year revenue growth, spurred by increased sales to NEC, and/or customer adoption of the new Wi-Fi phone, could move the valuation up. Current full year estimates for 2017 are $66 million in 2017, versus $56 million CAD in 2016, but year over year quarterly revenues have been down for the past three quarters and they are expected to be down again in Q4 2016. It may be until Q1 2017 until year over year revenue growth resumes. Until then, investors should look for news from Primus, or new large customers outside of Korea to drive the stock.

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