Full year diagnosis looking healthy for BATM

Israeli real-time technologies specialist BATM Advanced Communications moved into a break-even state in the third quarter and expects the bottom line to turn black by the end of the year.

Total revenues in the third quarter of 2012 were $24.7m, compared with $26.0m for the equivalent period in 2011, excluding revenues from the discontinued legacy telecoms business.

The group fell into the red last year as one of its major customers, Nokia, suffered a cataclysmic decline in fortunes as a result of the soaring popularity of smartphones. Revenue from the company's contract with Nokia amounted to only $0.6m in this quarter compared with $2.8m in the corresponding quarter of 2011; excluding the Nokia contribution, the company's revenues grew year-on-year by 3.9%.

While revenues in the Telecoms side of the business are stabilising, the real growth is coming from the Medical arm which, while still loss-making, is close to breaking even and now brings in about 45% of revenues, up from 41% a year earlier.

Company founder and Chief Executive Officer Dr Zvi Marom told Sharecast that the company's strategy on the Medical side of things is to target emerging markets, where the demand for smaller, sophisticated machinery is growing fast.

"Gone are the days when technology companies could dump their obsolete technologies in emerging markets. Try doing that these days in Africa and they will dump the machinery on your head," quipped Dr Marom.

The Medical division is going through the exhaustive process of securing certification for its diagnostics products in various countries. "As soon as we get the certification, we are sold out," Dr Marom claimed, while extolling the virtues of the group's technology.

The blended gross margin for the quarter was 31.7% compared with 35.9% for the same period of 2011, primarily due to sales mix and a lower margin in the Telecoms division, which is expected to slightly improve with the higher revenues anticipated in the final quarter of 2012. The decline in gross profit margin in the quarter was offset by lower operating expenses at both the Medical and Telecoms divisions.

At the end of the third quarter the group had net cash of $41.3m, down from $42.3m at the end of June. House broker finnCap says this suggest an enterprise value - the difference between the market capitalisation of the company and the net worth of its assets - of just $35m "for a growing business with revenues in excess of $100m."

In the final quarter of the year, the Telecoms division should pitch in with a greater contribution thanks to original equipment manufacturer agreements signed late last year, as well as through growth in the intellectual property business.

The Telecoms arm should see growth in all parts of the business through expansion of the distribution business in Eastern Europe, significant growth of the diagnostics business as a result of the aforementioned certifications, plus an increase in demand for the group's medical waste disposal solutions.