Okay, so you are probably thinking… yeah right, here’s that degenerate Double Bubbler banging on about that penny stock again. Well take a brief moment and read the following to see why my opinion is not so outlandish. You may one day thank me for it.
EnSilica develops custom semiconductor chips called ASICs. Essentially dedicated silicon expertly designed to a particular task such as providing encryption for Internet of Things devices, or efficiently moving data across satellite networks as will hopefully soon be the case with their custom ASIC for AST Space Mobile.
Recently MDA Space acquired a relatively low profile Israeli firm Satixfy for $193m in an all cash offer. Satixfy being a competitor to EnSilica in the ASIC marketplace and high growth satellite communications industry, with 2024 revenue of $20.6m. So that acquisition price is almost 10x last year’s revenue!
Compare that with EnSilica’s forecast FY25 revenue (to be confirmed in results anticipated next month) of approximately $25m to $27m as well as a forecast FY26 revenue of between $44m and $47m with ‘80% of FY 2026 revenue already covered by existing customer contracts’ according to EnSilica’s trading update on the London Stock Exchange in April. Please note I have used the current FX rate to convert figures that were originally quoted by EnSilica in GBP.
Consider also that another competitor of EnSilica’s is Filtronic who have significant contracts with Elon Musk’s SpaceX. Given the importance of Filtronic’s ASICs to SpaceX it has formed a strategic alliance with the firm and acquired 10,949,079 warrants – 5% of the current share capital of Filtronic – which would give SpaceX the opportunity to acquire a notable stake in the firm. Why would it want that? Well in my opinion to ensure they could have a say in the future direction of the firm as well as perhaps giving them the opportunity to create a defensive position to fend off hostile takeovers of Filtronic.
Who do I think are likely contenders to acquire EnSilica? AST Space Mobile (ASTS) would be a prime candidate in my opinion, as their latest BlueBird Block 2 satellites rely on EnSilica’s intellectual property. They may not want a competitor taking control of such a valuable partner, especially one with the talent to potentially improve upon what they currently offer for future iterations of BlueBird satellites.
I can also see European companies such as Eutelsat, SES, Airbus or Thales taking interest, especially given plans for the European Union’s forthcoming IRIS2 constellation. EnSilica’s IP and talent would seemingly be of great benefit to various industry titans in the satellite communications race that is heating up rapidly.
While I would like to see EnSilica grow to become a future British tech champion, I could understand the management accepting an offer of approximately 10x FY26 revenue. With a notable holding myself, I would not complain either.
While EnSilica’s share price has fallen this week, I still have immense conviction in this promising company and my recent discussion with Chairman Mark Hodgkins has only given me additional confidence in its future long term potential.
Yes, the share price may be turbulent in the times ahead however I may accumulate further should weakness persist (as I did this week) or following what I feel is an unlikely near term event, a rights issue, as is rumoured on ADVFN for example.
EnSilica is a company I intend to hold for the years ahead given their apparent trajectory as well as potential for being acquired at a significant multiple to its current value.
May fortune favour the brave!
EDIT: Thanks to Reddit u/TKO1515 for the correction. Satixfy were eventually bought by MDA Space recently for $280m (see link below). So over 13 times FY24 revenue!
https://aviationweek.com/space/commercial-space/mda-boosts-satixfy-takeover-bid-45-280m
