Diamond Equity Research Initiates Coverage on uCloudlink Group Inc. (NASDAQ: UCL)

Rhea-AI Summary

Diamond Equity Research has initiated coverage of uCloudlink Group (NASDAQ: UCL), providing a comprehensive report on its business model, technology, and market prospects. The report highlights the company's potential in the growing mobile data connectivity market, projected to reach US$1,210 billion by 2023. With proprietary cloud SIM technology and the launch of new products like the HyperConn™-Enabled 5G device, uCloudlink aims to leverage the increasing demand for mobile data solutions. Despite challenges from COVID-19, a recovery in international tourism is expected to boost uCloudlink's business going forward.

Positive

• Targeting a massive mobile data connectivity market projected to grow at a CAGR of 7.2%.
• Proprietary cloud SIM technology enhances user connectivity experience.
• Launch of new HyperConn™-Enabled products opens diverse market opportunities.
• Potential recovery in international tourism could accelerate business growth.

Negative

• Current global travel restrictions continue to impact international data business.

NEW YORK, July 12, 2021 (GLOBE NEWSWIRE) -- Diamond Equity Research, a leading equity research firm with a focus on small capitalization public companies has initiated coverage of uCloudlink Group Inc. (NASDAQ:UCL). The in-depth 22-page initiation report includes detailed information on the uCloudlink Group’s business model, services, industry, valuation, management, and risks.

The full research report is available here. Highlights from the report include:

Large Market Opportunity

uCloudlink is targeting the massive mobile data connectivity service market driven by the increasing adoption of mobile devices and internet penetration, and the surging demand for optimal mobile data traffic solutions with high speed and reliable connections. According to Frost & Sullivan, the total revenue generated from the global mobile data connectivity service industry by mobile data users is estimated to grow at a CAGR of 7.2% to US$1,210 billion in 2023. The robust development of the entire IoT industry further drives the demand for data usage and connectivity services, as we approach 5G widespread adoption, where entirely new applications will be possible in various application scenarios which may require new mobile data connectivity solution for users, hardware vendors and carriers with higher speed and more reliable connection. We see extraordinary business opportunities emerging in the industry and view uCloudlink as a connectivity service provider that could address growing demand from users for optimal networks across carriers through its leading mobile data traffic sharing marketplace and work towards the goal of allowing users to connect and share without limitations through the extensive capabilities of mobile data traffic sharing.

Unique Technology

uCloudlink appears well positioned to capture market share in various high growth segments with its proprietary cloud SIM technology and architecture enabling a smooth mobile connectivity experience, its distinct mobile data traffic sharing marketplace, and seasoned management team with years of operational experience in industry. The company’s integral cloud SIM technology and architecture, backed by its PaaS and SaaS platform, are its core competitive competencies in the data connectivity market, supporting physical SIM, eSIM, and soft SIM technologies to ensure that its users have optimal connection resources in its distributed SIM card pool supplied by various carriers globally. We also note the recently launched HyperConn™-Enabled 5G Mobile WiFi Device, which uses AI to ensure users always have the best WiFi connection, opens new markets such as education, IoT, remote work, and surveillance. HyperConn™ products can also help MNOs develop data connectivity markets globally, including 5G markets. Additionally, HyperConn™ products will allow the company to target IoT opportunities in new industries. The company recently released the GlocalMe Numen (first 5G mobile Wi-Fi device, MSRP $599) and GlocalMe Genie, a 4G pad device powered by HyperConn™ (unpriced). The first edition of Numen will be available in Europe and Asia in July 2021, with Genie targeted for release in Q4 2021. We view uCloudlink as a unique investment opportunity for investors seeking exposure to data connectivity markets, which is likely to benefit from the deployment of 5G and IoT technologies, as well as the return of international travel.  

Reopening Economy Presents Opportunity

Though the headwind of the global travel restrictions still pressures UCL’s international data connectivity business, we expect a business recovery accelerated by the rebound of international tourism, while its local data business continues its growth. Though international tourism arrivals declined sharply due to the outbreak of COVID-19, we believe the ongoing launch of vaccinations will speed up the recovery of international tourism and are optimistic around uCloudlink 1.0 sales growth, as international tourism returns to normal levels and the asset light cash flow nature of the business can eventually resume.

Valuation

It is challenging to value uCloudlink given its current business still in its early stage and limited number of publicly traded mobile data traffic sharing marketplace providers in market. In our comparable company analysis, we screened for companies within the global mobile data connectivity service market. Given the inherent assumptions in valuation models, we selected to use an average of our discounted cash flow valuation and our comparable company analysis valuation. We arrive at a valuation of $23 per ADS.

About uCloudlink Group Inc.

uCloudlink operates as an innovative mobile technology company that offers the world’s first and leading mobile data traffic sharing marketplace to users globally, with aggregated mobile data allowances from over 200 MNOs (mobile network operator) in 144 countries and regions. Leveraging its integral cloud SIM technology, it allows users to enjoy a smooth mobile connectivity experience without limitation to one MNO. uCloudlink was incorporated in 2014 and is headquartered in Kowloon, Hong Kong.

For more information, visit https://ucloudlink.gcs-web.com .

About Diamond Equity Research

Diamond Equity Research is a leading equity research and corporate access firm focused on small capitalization companies. Diamond Equity Research is an approved sell-side provider on major institutional investor platforms including Factset, Morningstar, and Thomson One.

For more information, visit https://www.diamondequityresearch.com.

Disclosures:

Please refer to the initiation report for full disclosures. Diamond Equity Research LLC is being compensated by uCloudlink Group Inc. for producing research materials regarding uCloudlink Group Inc. and its securities, which is meant to subsidize the high cost of creating the report and monitoring the security, however the views in the report reflect that of Diamond Equity Research. All payments are received upfront and are billed for research engagement. As of 07/12/2021 the issuer had paid us $35,000 for our services, which commenced 06/01/2021, consisting of $20,000 for an initiation report and $15,000 for six update notes. Diamond Equity Research LLC may be compensated for non-research related services, including presenting at Diamond Equity Research investment conferences, press releases and other additional services. The non-research related service cost is dependent on the company, but usually do not exceed $5,000. The issuer has not paid us for non-research related services as of 07/12/2021. Issuers are not required to engage us for these additional services. Additional fees may have accrued since then. Although Diamond Equity Research company sponsored reports are based on publicly available information and although no investment recommendations are made within our company sponsored research reports, given the small capitalization nature of the companies we cover we have adopted an internal trading procedure around the public companies by whom we are engaged, with investors able to find such policy on our website public disclosures page. This report and press release do not consider individual circumstances and does not take into consideration individual investor preferences. Statements within this report may constitute forward-looking statements, these statements involve many risk factors and general uncertainties around the business, industry, and macroeconomic environment. Investors need to be aware of the high degree of risk in small capitalization equities including the complete loss of their investment. Investors can find various risk factors in the initiation report and in 20F filings for uCloudlink Group Inc.

Contact:

Diamond Equity Research
research@diamondequityresearch.com

FAQ

What is the market opportunity for uCloudlink Group (NASDAQ: UCL)?

uCloudlink is targeting the mobile data connectivity market, expected to grow to US$1,210 billion by 2023.

What technology does uCloudlink Group use for mobile connectivity?

uCloudlink utilizes proprietary cloud SIM technology enabling high-quality mobile data connections.

What new products has uCloudlink Group launched recently?

uCloudlink launched the HyperConn™-Enabled 5G Mobile WiFi Device and GlocalMe Numen, a 5G mobile Wi-Fi device.

How is COVID-19 affecting uCloudlink Group's business?

COVID-19 has led to a decline in international tourism, impacting uCloudlink's international data connectivity services.

What is the projected valuation for uCloudlink Group (NASDAQ: UCL)?

The valuation for uCloudlink is estimated at $23 per ADS based on discounted cash flow and comparable company analysis.