Ameritek Ventures Advances Toward Production in the Rapidly Growing Optical Fiber Market

The accelerating pace of technological innovation has led to the development of more effective platforms for communication and transmission of information. We are living in the Information Age, where access to fast and reliable data networks is a critical priority to enable the technologically advanced lifestyle choices that many people desire.

Industry is scrambling to keep up. The requirement for more efficient and faster means of data transfer is driving a worldwide race to build out fiber optic networks. This rapid expansion has also increased demand for optical fiber preforms that are the basis for the production of commercial grade fiber optic cable. Only a handful of companies are capable of producing optical fiber to supply this rapidly growing market, and this has created an opportunity for Ameritek Ventures (ATVK – $1.60).

With a management team that is experienced in the production of optical fiber preforms, the Company has a head start as it aspires to join the ranks of optical fiber preform producers. Ameritek is now advancing its strategy to establish a production facility and become a supplier serving this hot sector.

Robust Projected Demand Growth For Optical Fiber Manufacturers

Fiber optic technology ensures faster transmission rates, increased bandwidth, and greater reliability across long distances, making it the most effective option for data networks. This week, Ameritek reported details from a study by Reportlinker, which projects an extremely high growth rate ahead for the entire sector. The expansion of worldwide data transfer capacity, implementation of high speed internet access, ongoing growth of cell phone networks, and the rollout of emerging 5G platforms, all will contribute towards increased fiber optic network development. Demand growth is therefore expected to continue through the foreseeable future.

About 400 million kilometers (~250 million miles) of optical fiber was installed during 2016 which in itself is an impressive statistic. However, analysts have estimated that annual demand for new optical fiber performs will exceed 700 million kilometers of product by 2021. This represents more than 300 million kilometers of additional optical fiber that will be needed on a yearly basis just to supply the growing demand as new network infrastructure is installed.

The international market demands that optical fiber supplies must consistently meet extremely precise standards in order to be connected to existing fiber optic networks. The high costs and technological hurdles to achieving this quality standard represents formidable challenges to potential new production sources coming online. Consequently, only a limited number of current manufacturers can achieve the high quality production standards required by the industry.

Ameritek has assembled an experienced and skilled technical team, working to establish a state of the art production facility. The objective is to achieve efficient operations and deliver the high quality production of optical fiber performs to supply just a small part of this growing market.

The Drive to Achieve Commercial Production

Ameritek is now engaged in the construction of its manufacturing facility located in Roanoke, Virginia. Designed from the ground up to achieve optimal processing techniques, the preliminary design work has now been completed. Watch the video below to find out how exactly fiber optics are made.

The Company will be active over the next few months to complete fabrication of new machinery at its production plant. While the plan is to gear up to commercial production starting in 2019, including the establishment of essential testing protocols and quality assurance standards, management will also be making inroads to win sales contracts and secure a client base. A highly respected technical team that is well-known within the industry will help the Company break through the barriers facing a new entrant in this market.

Ameritek has set its initial production objective to supply 5 million kilometers of optical fiber preforms in the first full year. A rapid increase in production capacity to 20 million kilometers of annual optical fiber output is planned within four years. While one may assume this surge could be overly ambitious, it would still only amount to about 5% of the projected organic growth in the overall market during that time.

And while the growth potential for this sector is impressive, the projected economics for this production output are also attractive. Roughly 70% of the profits in this sector are earned at the preform production level. Management expects it can achieve operating margins of 35% on an EBITDA basis. The lack of competitors, and the high profit margins, combined with its robust growth outlook, makes the transition to become a manufacturer an appealing proposition for Ameritek shareholders.

Conclusion

The prospect to capture a share of a profitable, high growth market sector is a recurring theme among emerging high-tech companies. It is not unusual however for the expected upside to dissipate early in the curve as many companies may charge in to expanding markets and compete for market share. Considering the daunting challenges facing new entrants for the production of optical fiber preforms, it is unlikely that the demand growth can be quenched through the emergence of new production sources alone, and therefore the opportunity to participate in a durable growth sector is in fact at hand for Ameritek.

As the Company works toward finalizing its construction phase and begins the process to achieve commercial production, much of the risk level related to an early stage company will be resolved. Surging demand for preforms has contributed to increased market prices and this will provide a further tailwind during the first years of operations. Once Ameritek secures a client base for its plant output it is unlikely that this market share will be easily displaced as the overall demand is projected to grow even faster than new supply becomes available.

It does appear that Ameritek is very well-positioned to achieve a successful startup of operations with an attractive growth outlook for years thereafter. In just two weeks since the publication of an interview with the Company at SmallCaps Investment Research this stock has surged close to 70% in value, as the market learns of the long term growth opportunity in this space.

With its technological advantage to streamline the production launch, and a highly respected and experienced management team, Ameritek is on the cusp of establishing itself as a supplier in this sector with few competitors to challenge for market share. Recommendation: BUY.

Smallcaps.us Advice: Buy	Price Target: $2.77	Latest Company Report (pdf)
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