WebTech Wireless is ready to roll

B. C.-based maker of truck tracking systems is set to hit the road

Levi Folk, Financial Post Published: Friday, May 22, 2009

Shares of WebTech Wireless Inc. (WEW/TSX) look poised for a breakout. The Vancouver-based leader in wireless vehicle-tracking systems, which help companies efficiently manage their fleets, has been working diligently to secure strategic distribution partnerships with the likes of AT&T Inc. (T/NYSE), FedEx Corp. (FDX/NYSE) and fleet management operators. Those partnerships are starting to pay off and are set to lead to strong revenue growth for WebTech this year and next.

"We are privileged with strong distribution channels and partners," Anwar Sukkarie, chief executive and co-founder of WebTech Wireless, said in an interview. The company is forecasting 40% revenue growth in 2009, equating to $28-million in sales coming from several strategic partnerships.

WebTech's technology allows companies to manage fleets -- to cut fuel and maintenance costs for example, by monitoring truck routes, driver habits, and maintenance.

System trials offer evidence WebTech technologies generate positive returns on investment, Sukkarie says. Ramping up growth through its distribution channels takes time, however, partly because products need to undergo initial testing.

"The FedEx deal with WebTech took a lot longer than anyone expected," says Hugh Cleland, manager of Northern Rivers Innovation Fund, who in 2006 learned of the deal that is only recently being rolled out.

"Even the deal with [Mexican insurance company] GNP was supposed to be a 45-day trial ending in June, 2008," yet revenue was deferred to 2009.

Some of WebTech's partnerships are through companies that provide fleet management services, such as the recently announced deal with TMW Systems Inc. The company is the largest provider of enterprise software for fleet management in the United States, says Cleland, who considers this deal a coup for WebTech because two of its competitors, Qualcomm Inc. (QCOM/NASDAQ) and PeopleNet Communications Corp., are TMW customers.

Similarly, a recently signed partnership with Automotive Resources International is potentially huge because ARI manages hundreds of thousands of vehicles leased to governments in the United States.

"Tens of thousands of systems" are being leased to ARI customers this year and next, Sukkarie says.

AT&T acts as a channel partner for WebTech, selling its technologies to the various government divisions that it has pre-existing business relationships with.

"AT&T is making a big splash with enterprise services," says Dev Bhangui, senior technology analyst at Haywood Securities, who has a 'sector outperform' rating on the stock, with a target price of $2.50.

WebTech closed at $1.20 yesterday in Toronto trading, down 4¢.

The first deal to be signed by AT&T with one of its clients will be announced soon and will amount to a few million dollars in revenue, Sukkarie says.

Perhaps the contract with the most potential is with FedEx, which picked up 7,500 locators from WebTech to be used for tracking services for its U. S. long-haul fleet, Cleland says. "It's only one of eight strategic business units with FedEx in one geographic location," Bhangui says.

Sukkarie expects WebTech to generate $1-million in recurring monthly revenue from licensing fees by the end of 2009, against monthly operating expenditure of US$1.3-million.

The real money will come in 2010, Cleland says, based on his expectation that FedEx will adopt WebTech technology on a company-wide basis.

WebTech earned 1¢ per share in earnings before interest, taxes, depreciation and amortization in the second quarter of 2009. The company is on the "tipping point" of profitability, though, and that could come quite quickly, Cleland says. It could generate $70-million to $80-million in revenue for 2010, by his estimates. That is when revenue will start flowing to the bottom line and earnings growth could be dramatic.

Of course, the share price will start anticipating this direction in advance of these results. It's really a question of timing, because the company has made major inroads with distribution channels to build up a substantial order pipeline.

levi@transmissionmedia.ca

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