Optelecom-NKF Acquired by TKH Group

Published Nov 11, 2010 00:00 AM
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Optelecom-NKF, a specialist in the large scale surveillance products (including video over fiber) has announced that TKH Group will acquire them [link no longer available]. While the acquisition was at steep premium to the current market price, it represents a steep decline to the company's value from just a few years ago. Given the structural shift of the large scale surveillance market to IP networks, Optelecom-NKF struggled and revenue fell significantly.

At the purchase price of $2.45 USD per share, the total price is approximately $9 Million USD (see Optelecom's Google Finance profile). In 2008, the company's annual revenue was about $45 Million USD, falling to Q2 2010 revenue of $7 Million USD (an annual run rate of under $30 Million). The price to sales ratio is about .3 which is extremely low even for the physical security industry where a ratio of 1 is typical and 2+ is good.

Optelecom-NKF provided clear guidance in their most recent Q2 2010 results: "In the second quarter of 2010, sales of fiber optic products were down 35% to $4.0 million while IP video revenue increased 2% to $3.6 million. The Company planned for a market shift toward IP video products and invested in the development of new products in prior periods. However, the decline in fiber optic sales during the period was significantly more than the increase in IP video revenue leading to a decline in total revenue."

On the other hand, the company has recently released a broad range of H.264 HD ONVIF cameras [link no longer available] that may help them going forward.

The TKH group looks like a solid fit. They are a fairly large systems integrator/contractor specializing in telecom, building and industrial market, including a security solutions division. Optelecom is likely to benefit from access/promotion to TKH's customer/sales base. TKH's 2009 revenue was over $1 Billion USD (despite a significant decline from 2008).