One thing forecasters agree on is that the Internet of Things (IoT) is going to be huge. The IoT is the networking of data from sensors embedded in our ‘smart’ homes, offices and factories, as well as the wider environment. By 2020 there could be 30 billion IoT devices in place and it’s suggested there’ll be over 75 billion in 2025. As prices fall the number of potential applications increases. In fact the list is almost endless: transport fleet management, security and surveillance, monitoring of production processes, controlling warehouse and retail stocks, energy usage, order tracking.
Low power WiFi on chip
Telit (AIM: TCM) offers a way to play the theme through its cellular communication modules. The company recently added to its technology portfolio by acquiring GainSpan which offers ultra-low power WiFi systems on chips. Rather than each device having to communicate via the cellular network, this allows multiple sensors to use WiFi or bluetooth to transmit over short distances to a gateway. The gateway then connects to the mobile network and uploads the data from these many devices to the cloud.
This is a more power efficient solution, which is important when sensors can be embedded for years. The deal fills a gap in Telit’s portfolio as it aims to provide a comprehensive hardware and software solution for IoT customers. The end-year trading update said revenues grew by 11 per cent last year, with the second half accelerating after a quiet first six months. The shares trade on a prospective p/e of 13.4 which looks very good value. However $28 million of R&D is expected to have been capitalised in 2016 in the context of $55 million ebitda, which flatters that p/e figure.