Relm Wireless (RWC) continues to be an attractive investment opportunity, particularly in light of a recent share repurchase announcement, and a $2.4 million contract win with the U.S. Department of Agriculture/U.S. Forest Service. On March 8th, RWC announced a plan to repurchase up to $2.5 million of its own stock before December 31,2013. This is significant to the extent that the company has only 13.5 million shares outstanding, for an equity market capitalization of around $30 million. Combined with the small daily trading volume, RWC could be a significant factor in creating demand for its own shares in the coming months if it actively tries to repurchase $2.5 million in stock.
Secondly, yesterday the company announced the $2.4 million in new orders from the U.S. Forest Service. Importantly, RWC stated that it expects to deliver the radios during Q1, or in the next few days before the quarter ends. I’m forecasting 2013 Q1 revenue of at least $7 million if the entire $2.4 million in U.S. Forest Service orders is recognized. Gross margins are expected to show further improvement, and I’m forecasting EPS of at least $0.03.
The share repurchase announcement and U.S. Forest Service win provide a strong comfort for me to continue holding the shares of RWC at these levels. I continue to wait to see if RWC will be successful in taking more market share from Motorola Solutions (MSI). If/when we reach a point where more mobile radio buyers are more comfortable purchasing Relm’s digital radio products, I continue to think RWC could be a $7 stock. Stay tuned. I first bought RWC in August, 2012 and continue to hold the shares.
