Elsight At The Cutting Edge Of Video Data

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Elsight has a unique competitive edge when it comes to encrypted video and data. TMT Analytics initiates coverage of the stock.

-Significant tender win with Israel's public security
-Substantial revenue opportunity in alliance with Hikvision
-Further applications in robotics, autonomous vehicles and telemedicine
 

By Eva Brocklehurst

Elsight ((ELS)), which produces secure transmissions, has won a significant tender which TMT Analytics believes is testament to its competitive edge when it comes to technology. The company, based in Israel, has developed algorithms which enable government and corporate customers to transmit uninterrupted encrypted video and data.

The company's technology offers security and reliability of real-time transmissions. Signals are automatically routed across the most stable channel and re-routed if necessary.

The contract is with the Israeli Ministry of Public Security which includes police, fire and prison security, to exclusively provide communications on the move. The contract presents a total addressable market in the next five years of more than US$100m, on TMT Analytics' calculations.

TMT believes the company offers a highly relevant solution at a time when autonomous vehicles, drones and telemedicine also require fast, reliable, secure communications.

Secure transmissions are achieved by encrypting and splitting up each transmission into four separate streams which are re-assembled at the destination. Encoding parameters such as transmission-rated video resolution are adapted on-the-fly and based on the available bandwidth to ensure uninterrupted communications.

The company has also recently announced an alliance with Hikvision, a global manufacturer of video surveillance product, and the analysts expect this to bring substantial revenue opportunities, anticipating additional partnerships in the near to medium term that will strengthen the company's distribution power.

Based on current estimates, TMT Analytics has a target of $2.60 a share based on a discounted cash flow valuation using a 14% weighted average cost of capital and initiates research coverage with a Buy rating. The company is expected to become positive on earnings per share in 2018.

Other Prospects

The video surveillance equipment market is large and mature and has only been growing by mid-single digits in the last five years but, given that the company's technology adds reliability and security, TMT believes there is ample room to grow. Other prospects and target market include armoured transport, remote facility management and unmanned aerial vehicles.

The analysts believe robotics, as well as the autonomous vehicle segment in particular, are likely to be a fast-growing opportunity going forward. The company could supply specific components to this industry such as on-board cameras with integrated, secure, connectivity.

Fully autonomous vehicles need to constantly communicate with other cars, road infrastructure, pedestrians and the internet. The communication is called V2X and TMT Analytics believes Elsight already has the building blocks to play a role in this area.

The analysts also suggest telemedicine – diagnosis and consulting in remote areas – would highly benefit from the functionality of the company's product, such as patients in outback Australia, in mountainous areas which are snowed in for most of the winter, or for military personnel on the battlefield.

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