SYTA: Update for Public Offering Deal Dilution Impact to Fund Topline Growth & Working Capital

By T. Moore, CFA

NASDAQ:SYTA

READ THE FULL SYTA RESEARCH REPORT

Business News Update

Siyata Mobile Inc. (NASDAQ:SYTA) completed a public offering of 8.7 million shares sold with common warrants. Combined effective offering price of $2.30 with net proceeds of approximately $18 million. Offering rationale is to fund growth and working capital, namely for the SD7 new product launch. Company now has approximately $20 million cash and $15 million net cash.

We raised our 2022 or 2023 revenue forecasts to reflect SD7 orders news. However, we lowered our price target valuation to $6 from $10 to reflect the large increase in share count and dilution.

We estimate breakeven adjusted EBITDA profitability in late 2022 for a re-rating of the stock.

Importantly, we now believe that Siyata Mobile is adequately funded for the next 12-18 months to support SD7 working capital and inventory for the launch, other growth initiatives and absorb minor net losses near-term.

Initial Orders for the SD7 device received in early December total more than $1.8 million for customers in the US and EMEA. We remain optimistic about the revenue potential from the SD7 launch for 2022 & 2023 topline.

We remind investors that Motorola Solutions (MSI) entered into a partnership agreement with Siyata Mobile for the launch of the new SD7 handset.

Factoring in news of order wins in December, we raise our SD7 revenues forecast to $5 million for 2022 (from $4 million prior) based on $300 pricepoint for 3.5% market share achievement in North America & Europe. $10 million revenues for 2023 (from $8 million prior).

Valuation



We value Siyata Mobile using a peer comparables valuation methodology based on EV/Sales for 2022 and 2023 estimates. We typically prefer EV/EBITDA, P/E & P/FCF multiples, but this company has not achieved positive adjusted EBITDA on an annual basis. We forecast positive adjusted EBITDA in 2023.

We reach $6.00 stock price by applying the peer group average of 2.6x EV/Sales 2022 to the blended average of our 2022 & 2023 sales forecasts for SYTA (to factor in a full year of SD7).

Stock is trading at 1.2x our 2022 Sales estimate for a 55% discount to the peer group average. This large discount appears unwarranted and could narrow if the company executes well on revenue growth and gross margin expansion in 4Q21 and 2022. Cash balance is strong enough to fund its growth and working capital needs.

We used 13.7 million share count to factor in the recent public offering of new shares. We are not counting possible dilution from warrants or stock options with exercise prices far out-of-the-money.

Net Cash position of approximately $15 million as of 1/12/22 after factoring in the recent net proceeds of the deal raise (approximately $18m). We applied $15 million Net Cash to our price target and Enterprise Value calculations. Rather than $3 million Net Debt of 9/30/21 from its last balance sheet filing.

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