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Wednesday, May 22, 2013
QinetiQ Group (QNTQY): If You Like James Bond, You'll Love This Company
In the Digital Age one thing is valued above all others: security. And nothing is more crucial to security than information. Whether acquired by HUMINT (human intelligence) or SIGINT (signals intelligence) information is a powerful weapon for governments and businesses alike. The firms that provide this critical information gathering infrastructure will form the foundation for the next generation of security companies. One of the major players in this growing sector is a Farnborough, England-based company. Today it's called QinetiQ Group ( QNTQY.PK )--pronounced "kinetic". But its beginnings are just as fascinating as its business. QinetiQ: From 007's Aston to Railguns Born as the Defense Evaluation and Research Agency (DERA) in the mid-1990s, the agency worked on "unique" problems and solutions. In essence, DERA's business was staying one step ahead of the bad guys. But DERA's mission actually goes even further back in time. Ian Fleming, a former intelligence officer and creator of the iconic James Bond character, actually patterned Bond's mad scientist/inventor "Q" and his labs on the formative QinetiQ back in the '60s. Fifty years later, QinetiQ is now into everything from rail guns (guns that use electricity to launch rockets or shells), to Scramjets (new jet technology that's three times faster than today's jets), to non-lethal weapons and equipment that today's James Bonds are packing. But today's QinetiQ has had a bumpy ride since its public offering in 2001. To continue reading, please click here...
In the Digital Age one thing is valued above all others: security. And nothing is more crucial to security than information.
Whether acquired by HUMINT (human intelligence) or SIGINT (signals intelligence) information is a powerful weapon for governments and businesses alike.
The firms that provide this critical information gathering infrastructure will form the foundation for the next generation of security companies.
One of the major players in this growing sector is a Farnborough, England-based company.
Today it's called QinetiQ Group(QNTQY.PK)--pronounced "kinetic". But its beginnings are just as fascinating as its business.
QinetiQ: From 007's Aston to Railguns Born as the Defense Evaluation and Research Agency (DERA) in the mid-1990s, the agency worked on "unique" problems and solutions.
In essence, DERA's business was staying one step ahead of the bad guys. But DERA's mission actually goes even further back in time.
Ian Fleming, a former intelligence officer and creator of the iconic James Bond character, actually patterned Bond's mad scientist/inventor "Q" and his labs on the formative QinetiQ back in the '60s.
Fifty years later, QinetiQ is now into everything from rail guns (guns that use electricity to launch rockets or shells), to Scramjets (new jet technology that's three times faster than today's jets), to non-lethal weapons and equipment that today's James Bonds are packing.
But today's QinetiQ has had a bumpy ride since its public offering in 2001.
Initially, the British government was hesitant to allow its quintessential cloak-and-dagger lab to land in the hands of an international public who may not be gathering controlling interests in the company for the right reasons.
In the United States, this issue isn't as sensitive for big defense firms. But for Britain this was like the weapons labs of the CIA, NSA and Navy SEALs all going public.
So QinetiQ went public, but the Ministry of Defence (MoD) held on to a 53% ownership stake.
That upset institutional investors because it made it hard to value the company, since investors would have no particular say in the management. This had always been a source of tension with the stock.
Finally in late 2008, the MoD divested completely from the company except for a special ownership share, which gives it power to step in if there is a takeover bid.
Bad Timing for QinetiQ But the timing couldn't have been worse. Just as the unfettered stock hit the market, the global economic crisis began.
All its work building a significant position in the U.S. market with QinetiQ North America (QNA) and high-profile hires like ex-CIA Director George Tenant and Bush Administration Pentagon officials was met by belt-tightened budgets and contract delays.
The stock lost half its value, almost immediately falling from above $16 to $9 by the end of 2008. The company hit bottom at the low $6 range by November 2010.
But the share price is starting to come back along with the company.
In FY 2011, QinetiQ met consensus earnings expectations and the stock has begun to regain lost ground.
The company also kicks off a 1.9% dividend, and when you compare its price-to-sales and price-to-earnings to its competitors, QinetiQ is significantly undervalued. With its earnings back on track, and its markets opening up again, the future now looks bright.
Late last year the company said it would beat its own earnings expectations for the year by 20% after restructuring and cost cuts drove a 45% surge in first-half profit.
QinetiQ is expected to post an average pretax profit of 126 million pounds ($199.82 million) for the fiscal year ending in March, according to a Thomson Reuters I/B/E/S poll of nine analysts. Its earnings report for FY2011 is due on May 24.
From its James Bond roots, today QinetiQ specializes in:
Robotics: The company's TALON and Dragon Runner systems are used by U.S., UK and Australian forces around the globe, including in Afghanistan. Having a foothold in all these allied services is important because it becomes a platform of convenience, allows for interoperability and more systems visibility among forces. Its robots are also increasingly being used by first responders, prisons and homeland security.
QinetiQ's relatively recent entry into the Australian market has also played a big part in its ability to grow organically across three distinct-yet-similar markets. It was its Australian division that grew sales during the rough times with increased demand across Asia.
This growing link with Asia bodes well for the future growth of QinetiQ Down Under, since the government and industry will look to upgrade its security measures as its economic influence grows.
Unmanned Vehicles: Aside from robots, which are operating around the world in various capacities, other prototypical vehicles are under development at QinetiQ include the HALE (high-altitude long endurance) UAV Zephyr. The Zephyr holds the official endurance record for an UAV for its nearly two-week flight that lasted 336 hours and 22 minutes. It beat the previous endurance record for unmanned flight by more than a factor of five.
QinetiQ also has a new unmanned jet ski called the Blackfish. This was developed by QinetiQ North America (QNA) for use on boats that patrol littoral waters and for port security.
QNA also just released a tactical robot controller that's like a universal remote for sea, air and land robots and sensors in an operational theater. Another pioneering product, it works across platforms and integrates all of the information on a handheld unit.
Cybersecurity: In the past few years, as contracts languished, QinetiQ started acquiring small cybersecurity companies. QNA has been especially active in the space. And for good reason, cybersecurity is one of the key strategic growth areas for governments and companies for at least the next decade.
As a long-term "Buy," QinetiQ is a great play on all of these global tech megatrends. For me, QinetiQ is a "Buy" below $10/share.
Whether acquired by HUMINT (human intelligence) or SIGINT (signals intelligence) information is a powerful weapon for governments and businesses alike.
The firms that provide this critical information gathering infrastructure will form the foundation for the next generation of security companies.
One of the major players in this growing sector is a Farnborough, England-based company.
Today it's called QinetiQ Group(QNTQY.PK)--pronounced "kinetic". But its beginnings are just as fascinating as its business.
QinetiQ: From 007's Aston to Railguns Born as the Defense Evaluation and Research Agency (DERA) in the mid-1990s, the agency worked on "unique" problems and solutions.
In essence, DERA's business was staying one step ahead of the bad guys. But DERA's mission actually goes even further back in time.
Ian Fleming, a former intelligence officer and creator of the iconic James Bond character, actually patterned Bond's mad scientist/inventor "Q" and his labs on the formative QinetiQ back in the '60s.
Fifty years later, QinetiQ is now into everything from rail guns (guns that use electricity to launch rockets or shells), to Scramjets (new jet technology that's three times faster than today's jets), to non-lethal weapons and equipment that today's James Bonds are packing.
But today's QinetiQ has had a bumpy ride since its public offering in 2001.
Initially, the British government was hesitant to allow its quintessential cloak-and-dagger lab to land in the hands of an international public who may not be gathering controlling interests in the company for the right reasons.
In the United States, this issue isn't as sensitive for big defense firms. But for Britain this was like the weapons labs of the CIA, NSA and Navy SEALs all going public.
So QinetiQ went public, but the Ministry of Defence (MoD) held on to a 53% ownership stake.
That upset institutional investors because it made it hard to value the company, since investors would have no particular say in the management. This had always been a source of tension with the stock.
Finally in late 2008, the MoD divested completely from the company except for a special ownership share, which gives it power to step in if there is a takeover bid.
Bad Timing for QinetiQ But the timing couldn't have been worse. Just as the unfettered stock hit the market, the global economic crisis began.
All its work building a significant position in the U.S. market with QinetiQ North America (QNA) and high-profile hires like ex-CIA Director George Tenant and Bush Administration Pentagon officials was met by belt-tightened budgets and contract delays.
The stock lost half its value, almost immediately falling from above $16 to $9 by the end of 2008. The company hit bottom at the low $6 range by November 2010.
But the share price is starting to come back along with the company.
In FY 2011, QinetiQ met consensus earnings expectations and the stock has begun to regain lost ground.
The company also kicks off a 1.9% dividend, and when you compare its price-to-sales and price-to-earnings to its competitors, QinetiQ is significantly undervalued. With its earnings back on track, and its markets opening up again, the future now looks bright.
Late last year the company said it would beat its own earnings expectations for the year by 20% after restructuring and cost cuts drove a 45% surge in first-half profit.
QinetiQ is expected to post an average pretax profit of 126 million pounds ($199.82 million) for the fiscal year ending in March, according to a Thomson Reuters I/B/E/S poll of nine analysts. Its earnings report for FY2011 is due on May 24.
From its James Bond roots, today QinetiQ specializes in:
Robotics: The company's TALON and Dragon Runner systems are used by U.S., UK and Australian forces around the globe, including in Afghanistan. Having a foothold in all these allied services is important because it becomes a platform of convenience, allows for interoperability and more systems visibility among forces. Its robots are also increasingly being used by first responders, prisons and homeland security.
QinetiQ's relatively recent entry into the Australian market has also played a big part in its ability to grow organically across three distinct-yet-similar markets. It was its Australian division that grew sales during the rough times with increased demand across Asia.
This growing link with Asia bodes well for the future growth of QinetiQ Down Under, since the government and industry will look to upgrade its security measures as its economic influence grows.
Unmanned Vehicles: Aside from robots, which are operating around the world in various capacities, other prototypical vehicles are under development at QinetiQ include the HALE (high-altitude long endurance) UAV Zephyr. The Zephyr holds the official endurance record for an UAV for its nearly two-week flight that lasted 336 hours and 22 minutes. It beat the previous endurance record for unmanned flight by more than a factor of five.
QinetiQ also has a new unmanned jet ski called the Blackfish. This was developed by QinetiQ North America (QNA) for use on boats that patrol littoral waters and for port security.
QNA also just released a tactical robot controller that's like a universal remote for sea, air and land robots and sensors in an operational theater. Another pioneering product, it works across platforms and integrates all of the information on a handheld unit.
Cybersecurity: In the past few years, as contracts languished, QinetiQ started acquiring small cybersecurity companies. QNA has been especially active in the space. And for good reason, cybersecurity is one of the key strategic growth areas for governments and companies for at least the next decade.
As a long-term "Buy," QinetiQ is a great play on all of these global tech megatrends. For me, QinetiQ is a "Buy" below $10/share.
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