Should you sell out of SKY and Space Global Ltd?

SKY and Space Global Ltd (ASX: SAS)

SAS Details

Targeting Central and South America: Israel-based nano-satellite communications company, SKY and Space Global Ltd has inked an Operational Evaluation Agreement with Globalsat Group to formalise the final step towards providing commercial M2M and IoT services in Central and South America. The agreement will be completed in 2 months and sets the arrangement within which Globalsat Group and SAS have agreed the framework and detailed procedures for the operational evaluation of the SAS services compatibility with Globalsat Group’s technology towards a commercial narrowband communication offering. The move is thus expected to improve digital inclusion in the region and generate opportunities for enterprises.

Mixed Performance: SAS had earlier received binding commitments for a significantly oversubscribed Placement, which was targeting to raise a minimum of $7,500,000 from exempt 708 professional and sophisticated investors at 12 cents per ordinary share. The Company also launched a fully underwritten Share Purchase Plan which enabled existing SKY and Space Global shareholders to participate on the same terms and each shareholder can purchase up to $15000 of shares at 12 cents per ordinary share. The Company decided to pay a fee of 6 per cent on all of the funds that are raised under the Capital Raising. Proceeds from this capital raising were slated for the completion of design, construction and for the launch cost of the first batch of approximately 20 Pearl nano-satellites (as a part of SKY and Space Global Equatorial Constellation) which will be launched in Q1 2019. It will also be used as a working capital for the Company. The Closing date for the Share Purchase Plan is 27 March 2018. The full constellation is scheduled to be completed by the end of 2020 which comprised of approximately 200 Pearl nano-satellites that covered the Equatorial Belt, +/-15 of the Equator and provided the narrowband communications services across the large parts of Asia, Central Africa and Central/South America. Losses after income tax for six months ending 31 December 2017 from ordinary activities increased by 8 per cent as compared to December 2016, i.e., losses of $4,683,936 inched up to $5,077,312 in the recent half year. While the group may be first of a kind in setting a telecommunication commercial network with nano-satellites, the revenue projection of US$500 mn per annum needs to be delivered. Further, higher expenses on marketing and travel, depreciation of the nano-satellite equipment, and share-based payments expense are impacting the performance.

Income Statement (Source: Company Reports)
 
SAS share price has been down by 30.6 per cent in the past six months and by 12.90 per cent in the past one week; while the recent news on agreement with Globalsat led the stock price move up by 4% on March 15, 2018. We think it is time that investors can “Sell” the stock at the current market price of $0.13
 

SAS Daily Chart (Source: Thomson Reuters)

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