In the fiercely competitive race to space, bigger is not just better but essential. Some of the world’s wealthiest individuals are investing vast sums to realise their vision of humanity living and working beyond Earth. Elon Musk’s SpaceX commands the lion’s share of the rocket launch market, surpassing even Nasa, while rivals like Jeff Bezos’ Blue Origin are far from standing still.
Most rocket launches deploy satellites for a range of applications, including security surveillance, disaster prevention, urban planning and remote broadband connectivity. For the likes of Musk and Bezos, the so-called satellite race is about shaping not just the future of technology but also humanity’s role in the uncharted frontier of space.
While aerospace giants like SpaceX and Arianespace are busy launching satellites into orbit, one Singaporean company — Addvalue Technologies — is steadily making its way to space with its proprietary solution for satellite operators and organisations in need of satellite services. The company, which is listed on the mainboard, says its inter-satellite data relay system (IDRS) is the only commercial solution worldwide that enables uninterrupted 24/7 communication between low-orbit satellites and ground stations.
Satellites rely on ground stations to transmit data back to Earth and receive instructions from their users while in orbit. Ground stations, also known as earth stations, essentially communicate with satellites and spacecraft. Without a direct line of sight to a sizable network of stations, which are costly to build and sometimes challenging to site, satellites may lose communication with Earth when making their rounds.
Low-Earth orbit (LEO) satellites are generally smaller and less costly to build than traditional satellites. Just as importantly, they offer faster communication because they are closer to Earth and, therefore, have lower latency, which refers to the delay measured in milliseconds that occurs during data transmission.
Addvalue’s IDRS is a compact metallic box nearly twice the size of a Rubik’s cube and weighs no more than a kilogram. This IDRS terminal, as the company calls it, is slotted into an LEO satellite and, when in orbit, fixes what Addvalue CEO and co-founder Tan Khai Pang calls a pain point that satellite operators and ground stations grapple with: downtime.
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“We are so used to having information at the fingertips. But for satellite operators, it’s not so. These days, more and more applications are time-sensitive. Without that real-time, on-demand connectivity, their space missions can become less responsive,” Tan, 66, tells The Edge Singapore.
Satellites equipped with Addvalue’s IDRS terminals could, for instance, have promptly detected the initial outbreak of the wildfires currently sweeping across Los Angeles and sounded the alarm early on, he points out.
Buoyant demand
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Addvalue’s first IDRS terminal made its commercial debut in space in 2020. Since then, 16 LEO satellites in orbit have been fitted with these terminals. As orders from new and repeat customers have increased in the last couple of years, more of these boxes are expected to reach space.
“We have shipped close to 40 units, which are ready to be launched over the next one or two years. We should be able to reach over a hundred satellites in three to four years,” says Tan, who took the helm of Addvalue in 2022 after serving previously as chief operating officer and chief technology officer.
Surveillance for national security has been and will likely remain one of the key drivers of demand for these data-relay terminals, says Tan. “It will not be wrong to say that the escalation of geopolitical uncertainties in recent years is one of the drivers of our growth.”
Addvalue also sells airtime for its IDRS, which allows it to earn recurring income. “If you buy a handphone, you usually also buy a data plan. In the same vein, satellite operators buy a data plan every time they launch a satellite. This is where we have recurring subscription revenue. The more satellites they launch, the more recurring revenue we get.”
Still a munchkin
Despite the growing appeal of its one-of-a-kind IDRS terminal, Addvalue is still a munchkin in the vast satellite business. Its IDRS technology is also not a must-have in the industry for now.
For these reasons, the company does not have pricing power. In recent years, each batch of orders for its IDRS boxes has been less than US$3 million ($4.1 million). So, while Addvalue’s overall annual revenue has been growing steadily since the financial year ended March 31, 2021, it is not huge.
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“What we need now is scale,” Tan says. “Some satellite operators may be thinking, ‘Well, I already have a ground station that gives me coverage. Coverage may be interrupted, but if I buy your terminal, I have to incur costs. Yes, I will have continuous service and coverage, but my existing coverage is still decent’.”
According to the Boston Consulting Group, LEO satellite connectivity will not displace traditional satellites. What is more likely, it believes, is that there will be multiple solutions complementing each other, resulting in hybrid connectivity that uses the right technology at the right time.
Addvalue’s other main source of revenue is the design and sale of intelligent hardware and solutions, which it categorises under its advance digital radio business. Its customers hail from more than a dozen countries worldwide.
“We make hardware work smarter. The hardware becomes smarter because of the software we put inside,” says Tan. “We sell to companies engaged in smart communication systems. They could be building 5G towers or unmanned aerial vehicles, for example. Instead of building from scratch, they can build from the platform we provide and shorten their development time.”
The advanced digital radio business has also been gaining traction. This, along with the satellite business, helped lift the company’s total revenue for the last financial year by 69% to US$12.8 million from US$7.6 million a year earlier. That enabled the company to earn just under US$0.3 million that year, ending three consecutive years of losses.
Tan expects Addvalue to do even better in the current financial year ending March 31. The momentum might even persist for several more years, based on Boston Consulting Group’s sector-wide projections. The US consulting firm says the global satellite communications market is on track to reach between US$40 billion and US$45 billion by 2030, from about US$25 billion last year.
Despite the buoyant industry outlook and the company’s growing order book, which most recently amounted to US$16.9 million, investor interest in Addvalue remains subdued.
That is not surprising, given Addvalue’s dilutive cash calls year after year, inclusion in the Singapore Exchange (SGX) financial watchlist since December 2023, and less-than-stellar balance sheet. The company’s current market cap is less than $40 million.
Being included in the SGX watchlist has severed access to bank financing. Having carried out a slew of share placements, rights issues and warrant sales over the years, the company has turned to slightly more complex fundraising options. These took the form of convertible loan notes and redeemable convertible bonds with interest rates that some investors might have found untenable.
Occasional disputes with customers are not helping matters. A subsidiary in its advanced digital radio business recently initiated arbitration proceedings in Hong Kong against Nanjing-based XEPIC Corporation, alleging wrongful termination or repudiation of contracts worth at least US$2.1 million.
Is the worst over?
For Tan, however, the worst is over for Addvalue, and investors ought to give it one more chance.
“We believe we are at the knee of the S-curve right now and going up. If not for Covid-19, we probably would have brought our solutions to market a couple of years earlier. The whole industry is coming of age. Based on our current operations and two pillars of growth, we are also pretty self-sufficient in terms of funding.
“It has taken us 10 years to get to where we are. Our business transformation this time around is real. I just don’t see how we will become irrelevant. I can’t promise what will happen in 10 years, but at least for the next three to five years, I can see the company growing.”
