The Contracts Keep Coming In For Gatekeeper Systems

What a week for Gatekeeper Systems (CA:GSI – $0.25 & US:GKPRF – $0.18 & GER:1GK – €0.14)! First, the Company announced a $270,000 CDN contract in the state of Virginia to install or upgrade intelligent video solutions for school bus interiors in four school districts, increasing its customer base in the state to 14 cities or counties. Then the Company announced that it will be equiping approximately 215 school buses in Halifax, Nova Scotia with its intelligent video recording solutions. This is in addition to the order announced earlier this month. Now Gatekeeper will be installing its video solutions in a total of 360 school buses for the Halifax Regional Center for Education, the largest school system in Atlantic Canada. Finally, it announced an additional 32 school bus installations in Niagara, Ontario. This brings the total installations to 130 school buses operated by Niagara Student Transportation Service.

These three follow-up orders with existing clients, or in regions that the Company already holds a market presence, is music to the ears of investors. Gatekeeper is gaining traction as its clients are obviously impressed with the Company’s already installed intelligent video solutions. But there is still much more business to be had just with existing customers. For instance, the Niagara Student Transportation Service transports 32,000 students daily on over 542 vehicles. Once this latest installation is complete, Gatekeeper will have installed its services on approximately 25% of their fleet.

Stop Arm Cameras Save Lives

As we mentioned in our previous article, Gatekeeper is on the correct side of government legislation. In February 2020, the Council of Ministers Responsible for Transportation and Highway Safety released the Strengthening School Bus Safety in Canada report from the federal, provincial and territorial Task Force on School Bus Safety. The Task Force recommended the application of video safety measures such as Stop Arm Cameras and 360° Cameras, two services provided by the Company. The Task Force report estimates that there are 51,670 school buses in Canada. Each one of these represents potential business for Gatekeeper.

These new orders in Nova Scotia and Ontario are an indication that school districts are already convinced of the benefits that the Task Force recommendation suggests. Using the Niagara Student Transportation Service as an example, local media in that region have reported that Niagara recorded approximately 40 passings in the first 6 months after Gatekeeper began installation of the initial 100 cameras. With tickets penalties ranging from $400 to $2,000, we can see how quickly the money adds up to allow the purchase of additional camera systems each year.

Also, how much sense does it make to protect 25% of children and leave the other 75% exposed with outdated, insufficient or non-existent security cameras? Not much. So it’s only a matter of time and budget constraints before all of the Niagara school buses have intelligent security cameras installed.

Government agencies tend to rely on just one vendor for a suite of similar services. So Gatekeeper certainly has an inner track to install services on another 400 vehicles, potentially quadrupling the contract with the Niagara Student Transportation Service in the coming years.

Gatekeeper’s success in garnering contracts with public transportation authorities and school bus services stems from its ability to offer a comprehensive and versatile suite of intelligent video solutions through its Platform-as-a-Service (PaaS) model. Devices can record, store, and wirelessly transmit video and audio from multiple devices, serving as the “black box” to aid in accident investigations.

Gatekeeper Remains An Undervalued Tech Gem As The Contracts Come In

At $0.245 on the TSX Venture Exchange, GSI has a $21.5 million valuation. We have mentioned several times before that GSI remains an undervalued tech gem on the TSX Venture despite its recent run. With these follow up contracts this is becoming even clearer. Gatekeeper is trading at around a 1.1x revenue multiple and has a positive trailing EPS of $0.01.

However, each of these contracts adds to the Company’s backlog, so we can reasonably assume that revenue for the following year will be higher than the $19 to $22 million forecasted for this fiscal year ending August 31, 2020. This growing and profitable Company with technology on the right side of government legislation is likely trading at less than 1.0x of its forward-looking 2021 revenue.

Gatekeeper is not one of these stocks that will move up 500% in a day or in a couple of weeks on news of a large gold discovery or approval of a COVID-19 test. But what is being made patently clear is that the Company will continue to release news of additional contracts or other positive developments that add directly to the bottom line. No individual contract will excite day traders, such as the one for $270,000 in Virginia. But each represents another brick in the wall in the mansion being built.

Gatekeeper will trade on fundamentals, and as those fundamentals improve, the stock price can only go up. This is one good reason why CEO Doug Dyment purchased over 2.9 million shares for $522,000 a few weeks ago. Gatekeeper has everything a small cap investor could possibly want in an investment: transparent financials, a straightforward and successful business plan, a solid balance sheet, and a strong leadership and management team led by a CEO who has laid down a significant amount of his own money to purchase more shares. Smallcaps Recommendation: BUY.

Smallcaps.us Advice: Buy	Price Target: $0.69	Latest Company Report (pdf)
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