Small cap stocks Vimicro International Corporation (NASDAQ: VIMC), Cohu, Inc (NASDAQ: COHU) and View Systems Inc (OTCBB: VSYM) are also surveillance and security stocks because they also offer products that can be used to keep an eye on us – for better or for worst. After all and go to any public space (whether its a shopping mall, entertainment venue or even a street corner), you will probably see (or maybe not see) some sort of security or surveillance equipment. With that in mind, here is a look at three small cap surveillance and security stocks you may have overlooked:
Vimicro International Corporation. Founded in 1999 in Beijing by several entrepreneurs from Silicon Valley and listed on the Nasdaq on November 15th, 2005 as the first fabless chip company from China to be listed on that exchange, Vimicro International Corporation is a leading video processing IC and surveillance solution provider that designs, develops and markets mixed-signal semiconductor products and system-level solutions that enable multimedia capabilities in a variety of products for PC/notebook, consumer electronics and surveillance applications. Vimicro International Corporation also says it has aggressively entered the surveillance market with system-level solutions and semiconductor products to capitalize on China's domestic demand. Earlier this month, Vimicro International Corporation reported a 11.1% revenue increase to $24.2 million thanks to higher sales of surveillance products (including a sizable surveillance order marking the company's expansion into Sichuan province) offsetting lower sales of PC and notebook multimedia processors plus GAAP net income of $1.8 million verses $2.4 million. In the earnings call transcript (available on Seeking Alpha here), the Chairman/CEO commented that surveillance is now their dominant business line and shows the successful transformation of the company that began in late 2010. A good thing because he commented:
"Now, turning to our imaging processing IC business, which includes PC camera imaging processors. Third quarter revenue was $5.5 million as compared to $15.2 million in the year ago quarter. This represents a year-on-year decline of 64%. The softness in the global PC industry continued through the third quarter."
He also commented that the expansion into Sichuan is a "strong validation of the national standard for our technology" plus the company is expanding into several new provinces and they anticipate advancing additional large orders in the near-term. On Thursday, small cap Vimicro International Corporation rose 1.76% to $1.73 (VIMC has a 52 week trading range of $1.06 to $2.35 a share) for a market cap of $49.75 million plus the stock is up 41.8% since the start of the year and down 12.6% over the past five years.
Cohu, Inc. With origins dating back to 1945, Cohu, Inc calls itself a leading supplier of test handling, burn-in and thermal solutions used by the global semiconductor industry, microwave communications and closed-circuit television equipment. Cohu's has three divisions or business categories: Semiconductor Equipment, Microwave Communications and Television Cameras (the later being CohuHD, a manufacturer of high-definition video systems that integrates the latest high-definition video imaging and compression technologies into ruggedized camera products designed for critical infrastructure applications). At the end of October, Cohu, Inc reported net sales of $60M verses $57.7M along with a GAAP net loss of $10.8M verses $1.7M due to a $4.8 million pretax charge for the write-down of inventory, primarily semiconductor equipment. It should be mentioned though that sales of semiconductor equipment accounted for 87% of fiscal 2013 third quarter sales while microwave communications equipment and video cameras and related equipment contributed 6% and 7%, respectively, for the same period – meaning the company is more of an indirect play on security and surveillance. Moreover and in the earnings call transcript (available on Seeking Alpha here), the CFO noted:
"The electronics division posted solid results, led by traffic applications. Security-related sales improved sequentially, though they remained below our plan due in part to the same governmental budget uncertainties that affected BMS."
And:
"As noted earlier, revenue of BMS was below plan due to delays in government-related orders, resulting from budget cuts and funding uncertainties. Additionally, a long expected letter of credit on a large order for a Middle Eastern customer was not received."
On Thursday, small cap Cohu, Inc fell 0.82% to $9.65 (COHU has a 52 week trading range of $7.96 to $13.40 a share) for a market cap of $240.36 million plus the stock is down 11% since the start of the year and down 18.5% over the past year. However, Cohu, Inc does have a forward dividend of $0.24 for a forward dividend yield of 2.4%.
View Systems Inc. A manufacturer and installer of weapons detection identification systems, video management platforms and tele-data communication networks, View Systems' security products are used by correctional facilities, schools, courthouses, government agencies, event and sports venues and commercial businesses. View Systems' most important security products would be the ViewScan, a walkthrough concealed weapons detector (CWD) that uses advanced magnetics technology to visually locate threat objects like hidden razor blades and cellular phones, but not common objects such as coins, keys and belt buckles so that false alarms that slow down security checkpoints can be eliminated. In addition, View System also offers the Visual First Responder, a first response remote video transmission system that can be utilized in areas where hazardous materials have been exposed plus its small enough to be worn on a belt, helmet or vest (or even by K-9 teams) while it transmits conventional video or infrared imagery to a command post. Its considered ideal for law enforcement SWAT teams, Fire Rescue units and HAZMAT team operations. Last Summer, View Systems issued a press release to say that they are rapidly regaining traction in foreign markets for security systems and that the company has a partnership with Brazil based Armorin, LLC to penetrate the Brazilian market (plus South America) as imported electronic security equipment there was worth an estimated $1.5 billion as of 2011 while the value of locally manufactured equipment was estimated to be worth $1.5 billion. View Systems also pointed out that over a dozen installations made in Bangladesh late last year have been very well received by the government and local security organizations to the point where the company is looking for someone to distribute its products in the South Asia and Middle East regions plus it has recently signed an agreement with a distributor in West Africa. Finally, View Systems has recently received new orders f! or its ViewScan from the State of Maryland, the Detroit School System Department of Corrections of Connecticut, Milwaukee and the Dodge City Kansas Community College. On Thursday, small cap ViewScan fell 1.37% to $0.0288 for a market cap of $5.67 million plus the stock is down 4% since the start of the year.
The Bottom Line. There are alot of players either directly or indirectly in the surveillance and security markets and investors might want to take a closer look at small caps Vimicro International Corporation, Cohu, Inc and View Systems Inc.
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