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CyanConnode – trading update initially seems promising… but is it?

By Steve Moore | Tuesday 10 April 2018

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

A Trading Update from self-styled “world leader in narrowband radio mesh networks” CyanConnode (CYAN) commences “since the start of the year, the company has seen increasing momentum and demand for its products across multiple jurisdictions, which will result in the company generating more revenues in the first half of 2018 than in the full year for 2017”. Sounds promising…

Including “the sales pipeline in India has expanded and includes multiple large commercial opportunities”, “additional commercial opportunities have also been identified in Iran and are being developed” and “during 2018, the company expects to benefit from the roll-out of the UK Smart Metering Implementation Programme”, it is emphasised “at the end of the quarter, the company had a global order book of $100 million and a large identifiable global pipeline, with new orders expected in the near term”.

However, it’s a problem of converting orders into cash here. For example, the previous trading update reported delay from a customer in deployment for one of the larger contracts – and it is now updated that “a regular dialogue has continued with this customer throughout the quarter, including a senior management visit to their head office to meet the CEO. The customer has reconfirmed that they will take delivery of the hardware that CyanConnode manufactured for them in Q4 2017, but currently the company has little visibility on timing of the first delivery”.

Optimism of meeting market expectation is stated “assuming that the company converts a sufficient number of the above opportunities into orders during 2018”, with it admitted “there is a large level of uncertainty on timings relating to delivery of some larger items in the order book and pipeline, which could cause a significant change in revenues, both to the upside and downside”.

Hmmm. Based on the track record, I’m not confident – and this also brings further into question how sufficiently funded the business may be. Thus, despite the initially sounding promise, this currently remains firmly on the bargepole list.

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