GPS Guidance of Agricultural Machine Controls will Grow and Grow (PINK:HEMGF)

The GPS Compass Location and Autopilot of a Commercial Vessel at Sea is Critical.

I really like the business model of HEMISPHERE GPS INC (PINK:HEMGF) because it is founded in mission critical management decisions that directly affect the bottom line profits of everyone involved; including HEMGF.

For example the Company makes GPS positioning and navigation systems for agriculture producers that guide flow controls for row crop spraying and mapping: think of the global market growth of food commodities as the world’s population adds 2 billion people before the end of the century and the precision that will be required to get crops to market. HEMGF public shares are half-owned by institutional investors; they recognize the needs ahead.  

Last week the Company expanded its multi-year OEM deal with Navico Inc, the world’s largest marine electronics company with HEMGF making a private brand autopilot for Navico that will be used on pleasure boats, yachts and commercial vessels. Based on Hemisphere GPS' patented Crescent Vector II technology, the autopilot will not only provide guidance, but adjust for heave, pitch, and roll output messages through an integrated tilt sensor and gyro system.

HEMGF reported a good Q3 on Nov 2 of this month with record revenues of $14.1 million, an increase of 7% vs. $13.2 million in Q3 2010. The third quarter is seasonally the slowest sales period for HEMGF and despite an early harvest, the quarter represented the highest third quarter revenue level in the Company's history.

Strong growth in all regions was offset by a decline in European revenues associated with uncertainty arising from the European debt crisis.

"The third quarter was the sixth consecutive quarter of recovery for our business coming out of the recession," stated Steven Koles, President and CEO of Hemisphere GPS. "Our sales are up 27% for the first nine months of 2011 and we expect to meet our objectives of 25% revenue growth for this year.

“The very early 2011 harvest in North America impacted sales in the quarter given our direct-to-farmer business model which does not push inventory to distributors in advance of end user sales. Grain prices, while volatile, remain above historical averages, and with US net farm income projected to increase 31% to $103.6 billion for 2011, we have been building up our product inventory for anticipated post-harvest sales and the 2012 buying season."

Gross profit for Q3 ’11 $6.8 million and gross margins were 47.9%. Shares lost 3 cents basic and diluted as they did in Q3 ’10. On September 30, 2011, the Company held cash of $10.3 million and working capital of approximately $31 million.

At $0.56 a share, I think the stock is undervalued.
 

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